Last night after Senate Majority Leader Harry Reid (D-NV) pulled his oil spill response bill, Sen. Robert Menendez (D-NJ) told reporters: “The key question is, whose side are you on? Are you on the side of Big Oil, or are you on the side of citizens in coastal communities?” Menendez does not represent any constituents who live on the Gulf Coast, so we should forgive him for not knowing that thousands of Gulf residents recently packed the Louisiana Cajundome to protest President Barack Obama’s oil drilling ban, a policy reinforced by punitive regulations in Reid’s oil spill legislation. If Menendez wants to know how actual “citizens in coastal communities” feel about oil, he should pick up a copy of Lafayette’s Daily Advertiser where Louisiana Oil & Gas Association President Don Briggs recently wrote:

There remains a public sentiment and misconception that companies operating the Gulf of Mexico are comprised of large transnational conglomerates, or “Big Oil” companies. This could not be further from the truth.

The president, media and policy makers in Washington all overlook the most important aspect of oil and gas operations in the deepwaters of the Gulf. Those most threatened by this moratorium are the independent oil and gas operators. Independents produce and drill nearly 50 percent of all wells and represent 70 percent of all lease activity in the Gulf of Mexico.

A recent study conducted by IHS Global Insight notes that independent oil and gas companies currently account for about half of the nearly 400,000 jobs, $70 billion in economic values and $20 billion in federal, state and local revenue generated by the industry in 2009. …In Louisiana alone, the deepwater drilling moratorium could eliminate more than 17,500 jobs in the coming six months. Overall, this detrimental policy will threaten the jobs of more than 200,000 hardworking Americans in Texas, Louisiana, Mississippi and Alabama.

But lifting President Obama’s job-killing oil ban is only the first step toward economic recovery in the Gulf. The region, and our country, are also in desperate need of oil spill liability reform that sufficiently aligns risk and liability with individual behavior. The current system, which caps economic damages at $75 million, socializes risk by spreading the costs across the entire industry. Simply raising the cap without more comprehensive reform, as the Reid bill would have done, would fail to fix the systemic problems and could effectively shut down offshore drilling entirely. The Heritage Foundation has outlined a new “Oil Spill Liability Plan for Reform” that employs a market based approach that both protects taxpayers and allows private industry to get back to employing unemployed Gulf residents. Specifically, the plan calls for:

  • A multi-tiered insurance and liability system that removes the $75 million cap, relies on private insurance to cover liability for normal operations, creates a voluntary insurance pool for liability exceeding $1 billion and protects companies from frivolous lawsuits.
  • An industry-established Organization for Offshore Safety Operations that would reduce the likelihood of spills by setting and enforcing safety standards at individual sites, monitoring real-time safety data, sharing best practices and sharing information with government regulators.
  • An industry-established preparedness and response capability, certified by an independent organization, to deal aggressively and effectively with accidents if they do happen, as well as a more robust and integrated federal oversight and national response.

Remembering the suffering caused by the 1986 oil price collapse, Louisiana Association of Business and Industry president Dan Juneau recently wrote: “The minute I heard the words ‘six-month moratorium’ leave President Obama’s lips, my mind went back to the economic miasma of 1986. I realized instantly that if he carried through with that policy, it was going to pummel our economy, eliminate thousands of jobs and disrupt the lives of many families. … The difference between 1986 and today lies in causation. The damage to Louisiana’s economy in the 1980s was brought about by economic factors. The danger today is entirely man-made. It is derived solely from a government edict. If there is a bright spot in the current crisis, it lies in the fact that a government edict is easier to turn around.” Let’s lift the ban, reform the liability system and get the Gulf back to work.

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