by Nancy Marshall Genzer
The Senate Environment Committee holds a hearing today on whether to jack up liability caps for companies that cause oil spills.
Legislation has been introduced in Congress that would blow the lid off the liability cap and raise it to $10 billion. Right now, they're only responsible for $75 million in damages.
Some lawmakers the raised liability cap would boost insurance costs too much for small oil companies, if they could get insurance at all. One argument against lifting the cap is that smaller companies would be priced out of drilling.
Tyson Slocum, who directs Public Citizen's energy program, says there are ways to keep small oil companies in the game. "If companies are concerned about potential financial risks going forward, they can team up together."
Loren Scott, professor emeritus of economics at Louisiana State University, says that's not the answer. According to Scott, a higher liability cap would increase costs so much that drilling in the gulf would be out of reach for small companies, even if they banded together. "If you increase the cost of operating in an area, and this will seriously increase the cost of operating in an area, you'll see less activity in that area."
Scott says right now, small companies have a share in about half the deep water wells in the Gulf.