Robert Menendez

US Senator for New Jersey
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Menendez Remarks On Oil Company Liability Before Environment And Public Works Committee

June 9, 2010

Washington – U.S. Senator Robert Menendez (D-NJ), author of the Big Oil Bailout Prevention Act which would remove the oil company liability limit, today testified on his bill before the Senate Committee on Environment and Public Works. Below are his remarks, as prepared for delivery:
                                                                          
Chairman Boxer, Ranking Member Inhofe, I want to thank you for holding this important hearing on S.3305, the Big Oil Bailout Prevention Liability Act.  We need to act quickly to make sure oil companies are held fully accountable for all damages related to an oil spill.

We have all come a long way since I introduced this legislation a month ago. The Administration has moved to embrace the idea of unlimited liability for drilling in deep waters for all future drilling operations. Senators Vitter and Murkowski have introduced legislation that they say would hold BP accountable for unlimited damages for this incident, but is silent on future spills.

And my proposal has changed as well. When this disaster first occurred, a $10 billion liability cap not only seemed adequate to compensate all those impacted by this spill, but it represented a sizable increase from the ridiculously low current level. But this spill is larger in scale than anything we have seen before in U.S. waters. It has forever changed our understanding of the potential size of oil disasters – even for someone like me, who had long warned about the danger of rig blowouts.  For that reason I, along with the 20 cosponsors of S.3305, have today introduced new legislation allow for unlimited liability.

So we have come a long way, but we still have a ways to go. One of the objections I have heard to removing the liability cap is that it will cause “Mom and Pop” drillers to go out of business. But this is not a question of small versus big companies.  This is about safe versus unsafe companies.

If you are drilling in the Gulf and are cutting corners the way BP allegedly has, then there is no doubt that insurers will be charging you more because you are a risky company. And if you are an unsafe company I am sure regulators are going to force you to overhaul your operations and use better equipment. That will definitely cost an unsafe company some money to get its operations into compliance.

But a company with a higher safety standard should not have those same issues to worry about. The insurers and regulators alike should be able to see that you are operating safely, and in turn, you should be able to continue your operations without the fear of major cost increases.

However, if you are an unsafe company that is also small, then we should all be concerned. According to a recent analysis by Credit Suisse, BP’s clean up costs, economic damages and other related costs could total 37 BILLION Dollars. That is a shockingly high number but one BP will likely be able to absorb since the company is worth well over $100 billion dollars. But what if a similarly unsafe, but smaller company had caused this leak?

As you can see from the bar chart I have brought and the report I have provided, there is a company worth less than $500 million drilling in over 4,000 feet of water in the Gulf.  If a $500 million company had been the operator and had a spill causing $37 billion in costs and damages, I think it is clear that the residents of the Gulf and the American taxpayer would be holding the bag for over $36 billion dollars.

So, unsafe companies that are not so big that they could pay for their catastrophic mistakes might have reason to worry. But small, safe companies should be able to continue operating in the Gulf without fear.

We need to embrace unlimited liability for damages stemming from this spill, and we need to change the law for all potential future spills as well so the American taxpayer knows oil companies will pay for what they spill.

But I do not believe the Vitter approach will survive judicial scrutiny because it attempts to form a contract without the consent of the parties and because it is an unconstitutional Bill of Attainder. By contrast the Department of Justice and the Congressional Research Service have both testified that my bill would survive constitutional challenge. We need to pass legislation that will hold all oil companies accountable and hold up in court.

It is time we finally start treating oil companies like we do everyone else. The average taxpayer does not enjoy a liability cap, the guy installing solar panels on your roof does not have a liability cap and neither should oil companies.

Madame Chairman, the “mom and pops” we should be worried about are not oil companies, but “mom and pop” taxpayers who should not have to pay to clean up oil spills. Thank you again for the opportunity to testify about this important issue.

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