May 5 (Bloomberg) -- The Obama administration is backing “significantly” higher limits for damages BP Plc might face for the oil spill in the Gulf of Mexico and won’t rule out scaling back plans to expand offshore drilling.
“Beyond clean-up and containment, BP must be held responsible for the damages this spill causes,” White House communications director Dan Pfeiffer wrote on the White House website yesterday. The administration “strongly supports” a move in Congress to raise an existing $75 million cap on damages under the Oil Pollution Act.
BP Chief Executive Officer Tony Hayward said yesterday he expects that limit will be exceeded. The London-based company, Europe’s second-largest oil producer, will honor all “legitimate” claims from those harmed, such as the region’s fishing and tourist industry, he said after meeting in Washington with Gulf Coast lawmakers.
Separately, White House press secretary Robert Gibbs said “I would not rule it out,” when asked if President Barack Obama would change his mind on a plan announced March 31 to open portions of the East Coast to oil and gas exploration.
The April 20 explosion and fire on a drilling rig leased by BP resulted in a leak that is spreading an estimated 5,000 barrels of crude a day in the Gulf and reshaping the U.S. energy debate in Congress. Democratic lawmakers from New Jersey and Florida are among those calling on Obama to abandon his plan to expand drilling as Congress considers climate policy and lawmakers look ahead to the November elections.
One of those lawmakers, Democratic Senator Robert Menendez of New Jersey, is co-sponsoring legislation to raise the limit on damages awards from a spill to $10 billion from $75 million under the current law, which was passed in 1990. The cost to BP of cleaning up the spill isn’t affected by the cap.
“The administration -- in the context of a comprehensive energy bill which would help move us to a clean energy future -- strongly supports efforts on Capitol Hill to raise the Oil Pollution Act damages cap significantly above $75 million,” Pfeiffer wrote. The White House also is examining what “fines or damages BP could be liable for under additional applicable federal and state laws.”
Senate Majority Leader Harry Reid, a Nevada Democrat, said today he supports raising the liability cap to $10 billion. “I would support that piece of legislation,” he told reporters.
House Republican leader John Boehner of Ohio, asked whether he would support raising the damage limit, said his party’s lawmakers first want to “find out who really was responsible for this and make sure that the law is enforced.”
Menendez’s legislation would apply the higher limit retroactively to the BP spill.
“I think it is inevitable that the cap will be exceeded,” Hayward said after meeting with senators from Louisiana, Mississippi and Florida at the U.S. Capitol.
BP will “have the resources to deal with this,” he said.
Shares in the London-based company, which had lost 16 percent of their value since the explosion, rose for the first time in four days. BP gained as much as 2.8 percent to 565 pence today.
Gibbs reiterated Obama’s stance that domestic oil production has to be part of an energy strategy. The president said May 1 that he’s directed Interior Secretary Ken Salazar to conduct a “thorough review” over the next 30 days to determine whether more safety precautions are needed for offshore drilling.
“The president wants to use that investigation to inform anything that might happen going forward,” Gibbs said today.
Obama’s plan would permit exploration in the Atlantic Ocean from south of Delaware and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida. Expanded offshore drilling has also been proposed in Senate negotiations over climate-change legislation in a bid to win energy industry support for limits on carbon dioxide and other greenhouse gases.
The BP spill has solidified a division in the Senate between Republicans who favor more domestic oil and gas exploration and Democrats who don’t.
“To get my vote, any energy or climate bill must prohibit drilling in places where a spill could reach New Jersey’s waters,” said Senator Frank Lautenberg, a New Jersey Democrat.
Even backers of wider exploration said they expected tighter regulation of the oil industry.
“Those of us that support offshore drilling have to be open to the possibility that we have to toughen up a bit,” said Republican Representative Joe Barton of Texas, who called himself a “strong supporter” of the oil industry.
State officials also have weighed in. California Governor Arnold Schwarzenegger, a Republican, withdrew his support for offshore drilling yesterday, after a similar move by Florida Governor Charlie Crist, who raised doubts about environmental safety.
“I think we’re all going to back off from offshore drilling until we get a better handle of how we can make it safe,” Reid said.
At least three committees -- House Energy and Commerce, House Natural Resources, and Senate Energy and Natural Resources -- plan hearings to investigate the spill during the next month.
--With assistance from Patrick O’Connor, Lisa Lerer, Simon Lomax, Edwin Chen and Kate Andersen Brower in Washington. Editors: Joe Sobczyk, Laurie Asseo.
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