Saturday, July 31, 2010

Drilling Permit Overhaul To Doom Small Outfits

Liability caps of $75 million are an “implicit subsidy,” said the Obama White House as the House of Representatives concluded its legislative session.

Democrats finished off the session with a close vote to change the system of permitting offshore drilling – 209 to 193.

Removing the liability limits will squeeze out independent producers, according to a major industry spokesman, Barry Russell, president of the Independent Petroleum Association of America.

Because insurers have been adamant about refusing to write policies in the absence of the limits on the damages they must cover in case of blowouts or major spills, industry observers are predicting the net effect will cause only major producers who are able to insure themselves to stay in the offshore drilling business. The house also voted 216 to 195 to lift the moratorium on drilling for projects that have demonstrated compliance with permit rules.

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