Letter Regarding Legislation Related to the Gulf of Mexico Oil Spill

TO THE MEMBERS OF THE UNITED STATES CONGRESS:

As the House and Senate debates legislation related to the Gulf of Mexico oil spill, the U.S. Chamber of Commerce urges Congress to consider the long-term ramifications of various bills on U.S. energy security and the economic well-being of communities along the Gulf Coast and the United States as a whole. Congress has an important role to play in considering legislation to prevent a similar spill in the future. However, Congress must reject legislation – particularly hastily prepared legislation – that would keep American energy resources offline and thus drive energy producers overseas, along with their infrastructure and expertise, and hundreds of thousands of well-paying U.S. jobs.

Congress should resist the rush to act on legislation in the midst of the ongoing catastrophe in the Gulf; priority number one must remain permanently sealing the well and mitigating the extensive environmental damage. The Chamber believes that an independent commission, similar to the one included in legislation reported by the Senate Energy and Natural Resources Committee, would inform the legislative process by providing important data, technical analysis, and expertise, in addition to the Obama Administration’s National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. Undoubtedly, the reviews that these commissions will undertake should inform Congress as legislation is developed and considered.

Moreover, many of the legislative proposals under consideration could have serious consequences, such as increased dependence on foreign oil at higher costs in the short- and longterm, growing energy security risks, and a less competitive and potentially crippled Gulf coast economy. The impact of legislation could be severe considering that the oil and natural gas industry employs more than nine million Americans, including 46,000 in the Gulf Coast region.

In particular, the Chamber strongly opposes legislation that would set an unlimited or excessive liability cap for energy exploration activities. The Oil Spill Liability Trust Fund provides much-needed certainty to companies that produce domestic energy resources and to Americans who are understandably concerned about the potential for oil spill damage. While it is prudent for Congress to revisit the existing $75 million liability cap, an excessive liability cap would make it a near certainty that oil exploration in the Gulf and at other offshore locations across the U.S. would dramatically diminish or cease altogether, because companies would be unable to afford insurance to cover the liability risk. Independent producers, which hold approximately 90 percent of Gulf leases and produce approximately 30 percent of the oil and 60 percent of natural gas in the Gulf, would be particularly hard hit. Simply put, unlimited or excessive liability requirements would make it virtually impossible for companies to economically produce domestic energy resources.

Moreover, the Chamber is concerned with legislative proposals that would increase the availability of non-economic damages. In particular, amendments to the Jones Act and the Death on the High Seas Act could authorize recovery for “loss of care, comfort, and companionship.” Because such damages are entirely subjective, they often result in exorbitant jury awards. Further, certain proposals could undo a U.S. Supreme Court decision that limit the size and scope of punitive damage awards in admiralty cases and authorize retroactively dramatic punitive damages verdicts in maritime litigation – giving rise to possible constitutional due process implications. While increasing the availability of these types of damages would purportedly assist those injured by the Gulf oil spill, the long-term negative consequences on the U.S. economy would reach far beyond the oil spill context and could be severe.

In addition, the creation of unnecessary and duplicative regulatory obstacles could make it exceedingly difficult to produce energy in the Gulf. The current uncertainty created by existing and planned regulatory action stemming from Secretary Salazar’s May 27 Safety Report to President Obama has already caused energy producers to begin moving infrastructure to other countries. This situation has essentially created a moratorium on American jobs and economic growth along the Gulf Coast. For example, Louisiana faces losses of up to 10,000 jobs this summer due to the Department of Interior’s blanket moratorium on drilling, and by 2014, the Gulf region is estimated to lose as many as 120,000 jobs if the moratorium continues, according to IHS Global Insights. Offshore operations in the Gulf of Mexico support hundreds of thousands of jobs and account for more than 30 percent of domestic oil production. For these reasons, the co-chairs of the National Commission appointed by President Obama, former Administrator of the Environmental Protection AgencyWilliam K. Reilly and former Senator Bob Graham, after hearings in the Gulf Coast region raised strong concerns with the energy production moratorium.

Finally, Congress should not exploit the tragedy in the Gulf as rationale to levy excessive new energy taxes on American consumers and producers. The nascent economic recovery cannot afford additional extreme taxes on domestically produced commodities that the entire United States depends on every day. Ultimately, such new taxes could encourage American operators to move investments elsewhere, taking many of the 9.2 million jobs in the oil and gas industry with them. Excessive taxes would also invariably increase U.S. dependence on imported energy as it did in the 1980s, further increasing the risks to U.S. energy security.

The U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than three million businesses and organizations of every size, sector, and region, urges Congress to reject any legislation that does not take into account the significant economic growth, energy security, and competitiveness issues that must be considered.

Sincerely,

R. Bruce Josten