Yesterday, Senate Majority Leader Harry Reid announced an energy bill without a cap-and-trade provision—a victory for the American economy.  Yet, like the famous Miracle Max scene in The Princess Bride, cap-and-trade is only “mostly dead.”

In a year when seemingly-dead legislation has suddenly come back to life, it is premature for Americans to dance a victory dance that their economy has been spared.  Even small victories in Washington are followed closely by new battles.  We must remain watchful for cap and trade to return later in the year, stay focused in the near term on the possible danger of new legislation that could drive America’s offshore oil and gas industry out of business, and hold out for a more prudent plan.

The abandonment of cap and trade in this round, clearly to Senator Reid, does not mean the idea has been put permanently to rest.  He said, “This is not the only energy legislation we are going to do…  This is what we can do now.”

He apparently has not lost his drive for a policy that could, according to the research of Heritage economists, cost the U.S. economy $9.4 trillion in reduced economic activity between 2012 and 2035.  While there are no permanent losses in Washington, there are also no permanent victories, especially with a possible lame-duck session in the future.  Even this small victory today is overshadowed by a greater present danger of energy legislation that would have the same effect as a drilling moratorium.

Some in the Senate are proposing an impulsive reaction to the tragedy of the oil spill.  Congress is considering simply raising the liability cap for oil companies from $75 million to well into the billions.  Unfortunately, this policy would stifle America’s oil and gas industries, and would have the same effect as a moratorium.  A response to the Deepwater Horizon accident is justified, but such action must simultaneously hold future parties liable for harm they may cause while allowing safe actors to continue to operate.

If the liability cap is raised absent other reforms, oil and gas companies may simply move their business elsewhere and the economic costs to Americans would be devastating..  High energy costs would be passed down to consumers through higher prices and we would be forced to buy more oil from overseas.  Heritage research has shown that if an offshore drilling ban were instituted, the GDP of our country would drop by $5.5 trillion in the period between 2011 and 2035, and by 2030 we would have 1.5 million fewer jobs.

This would obviously add to our struggles at a time when we are already suffering economic hardship.  According to a recent Bloomberg poll, more than 2/3 of the country already thinks we are economically on the wrong track and unemployment easily ranks as the top issue of concern. While liability reform is necessary, simply raising the cap is insufficient.  Rather, a more comprehensive overhaul is necessary.

We Americans must keep sight of our vision of a prosperous and free economy and demand a solution that holds the parties who have caused oil spills responsible, while preserving the ability of others to operate safely.  The Heritage Foundation will soon be releasing a plan for a new system that would accurately assign the risk of drilling without “socializing” that risk (something that disconnects people from responsibility or the need to change their practices) and would allow the off shore oil and gas industry to continue safe operations.

While cap and trade is “mostly dead,” conservatives should be on the lookout for such legislation in a “lame duck” session, as well as any bills containing drastically higher liability caps that would amount to a drilling moratorium.  Both types of bills would be devastating to our economy and way of life.