Scenarios: Tighter regulations to follow Gulf oil spill

By Ayesha Rascoe

WASHINGTON (BestGrowthStock) – With oil still gushing unchecked into the Gulf of Mexico, U.S. lawmakers are set to turn up the heat on the offshore oil drilling industry.

Although the spotlight is now on BP Plc, Transocean Ltd, and Halliburton, the entire oil and natural gas sector is likely to feel the legislative and regulatory fall-out from the accident.

Executives from these businesses directly involved with the rig disaster faced tough questions about the cause and response to the spill Wednesday during a second day of congressional hearings on the incident.

Lawmakers have already introduced legislation to make BP pay more for the economic damages resulting from the rig accident. Meanwhile, the White House on Wednesday offered its own legislative plan to pay for the spill.

Here’s a look at some of the new laws and regulations that may result from the spill:

MAKING OIL PAY

Lawmakers in both chambers have proposed bills that would raise the amount of money BP would be required to dole out for economic losses caused by the spill to $10 billion from the current cap of $75 million. With broad support from congressional leaders the White House, a measure along these lines is likely to pass in some form.

There are also likely to be changes to the federal Oil Spill Liability Trust Fund, authorized for use in the aftermath of the Exxon Valdez disaster. Lawmakers are considering raising the 8 cent per barrel fee the industry pays to support the fund by 1 to 25 cents.

The White House proposal released Wednesday would increase this per barrel fee by 1 cent.

Democratic Senator Frank Lautenberg of New Jersey introduced legislation this week that would impose an annual fee of $10 for every acre leased for offshore drilling to raise money for clean energy transportation technology. Lautenberg said fee could raise $1.8 billion a year.

The additional fees and liability risks could hurt smaller oil and natural gas operators offshore that may not be able to handle the costs.

REGULATING THE INDUSTRY

The Interior Department on Wednesday announced it would change the way it oversees offshore drilling. The department is splitting the responsibilities of its Minerals Management Service to separate its oil royalty collection and safety inspection roles.

As part of the shift, the Obama administration has asked for an additional $29 million to pay for more inspections of offshore platforms and a review of procedures.

The overhaul will undoubtedly lead to stricter regulations of offshore drilling. With the agency coming under heavy fire for allowing BP to bypass some environmental studies, there will likely be more stringent environmental analysis and oil spill response plans.

Regulators will also likely establish more rules regarding the equipment and techniques used in offshore oil production. The current focus on faulty blowout preventers and well cementing procedures as a possible causes for the accident will likely lead to more standards in those areas.

RESTRICTING OFFSHORE DRILLING

Some lawmakers are looking at placing additional protections on offshore drilling. The Senate climate bill released Wednesday would allow U.S. states to prohibit offshore oil activity within 75 miles of their coasts.

Other lawmakers fromcoastal states have called for a complete halt to offshore drilling in any new areas, saying the risk is just too great for coastal economies.

Investing Research

(Reporting by Ayesha Rascoe, editing by Jackie Frank)

Scenarios: Tighter regulations to follow Gulf oil spill