May 25, 2010

Sheldon’s Opening Statement at Senate Energy and Natural Resources Committee

Whitehouse Testifies About his Tour of BP Oil Spill in Gulf of Mexico and Discusses Legislation Introduced to Address Oil Spill

Thank you Chairman Bingaman. Thank you Ranking Member Murkowski, and Members of the Energy and Natural Resources Committee –

First of all, thank you for holding this hearing. I encourage you to review the penalty and liability framework governing offshore drilling, and enact changes to this framework, so we can prevent future disasters like the one now unfolding in the Gulf.

Thank you also for inviting me to make a few remarks about my Outer Continental Shelf Lands Acts Amendments of 2010 bill, S. 3346. The bill seeks to enhance penalties for failing to meet worker safety and environmental regulations on offshore oil rigs. It is just one piece of the puzzle. My colleague, Senator Menendez, has introduced two other bills, to raise liability caps for oil spills when they occur, and to eliminate the per-incident cap on claims to the Oil Spill Liability Trust Fund. I am a cosponsor of both of these bills and commend Senator Menendez’ leadership on this issue. I look forward to working with him and all of my colleagues in the Senate to forge a strong deterrence system to discourage irresponsible oil drilling.

Just yesterday, as the Chairman has indicated, we visited Louisiana. The Chairman, Ranking Member, Senator Landrieu, Senator Durbin, and others to inspect the disaster caused by the BP Deep Water Horizon oil spill. Since the tragic explosion on this oil rig on the night of April 20 which took the lives of 11 workers, oil from Mississippi Canyon Block 252 has been spewing uncontrollably into the deep waters of the Gulf, at a rate that no one seems to be able to accurately calculate and that has very likely been underestimated. I knew the extent of the spill from press reports, but it is another thing entirely to go and see the massive oil slicks spread across the surface of the Gulf, with black smoke billowing off of the waters where controlled burns are taking place. Oil is now also washing up on coastal beaches and wetlands – areas vital to the economies of Louisiana, Mississippi, Alabama, and Florida.

While in the Gulf, we also heard from shrimpers and other Gulf fisherman about the destruction of the ecosystem and the potential collapse of their industries. Some of these folks are second and third generation fisherman; this is literally the only life they have ever known and they worry it could be gone forever. Rhode Island fisherman face similar worries at home, more based on economic concerns than on oil spills. But I am sympathetic to the concerns of our fishing community, and this fishing community.

S. 3346 would amend the Outer Continental Shelf Lands Act by enhancing penalties in the following three ways:

1. Increasing civil penalties from $38,000 per violation , to $75,000 per violation per day.

2. Where the violation constitutes a “threat of serious, irreparable, or immediate harm or damage to life (including fish and other aquatic life), property, any mineral deposit, or the marine, coastal, or human environment,” increase civil penalties from $38,000 per violation per day to $150,000 per violation per day.

3. Increase the upper bound of criminal penalties from $100,000 per violation per day to $10 million per violation per day.

The goal of the Outer Continental Shelf Penalties Program is to assure safe and environmentally sound oil and gas operations on the Outer Continental Shelf. Enhancing these penalties will go a long way to deter oil companies from cutting corners on safety measures that can prevent disasters like the Gulf spill.

We need to take a comprehensive look at the penalty and liability framework that governs offshore oil and gas drilling, and the substantive requirements that exist to protect our workers, our coastlines, and the marine environment from devastating oil spills. We may want to consider banning drilling at certain depths until it is clear that we can engage in repair and recovery activities, at those depths. Chairman Bingaman, I applaud your efforts to address the liability portion of this work, in today’s hearing. One thing I am certain of is that the currently penalty and liability system is inadequate. In just the first three months of this year, the five largest oil companies worldwide, including BP, made $23 billion in profits. The current liability and penalty limits are inconsequential in the face of those record-breaking profits.

I want to close by anticipating an argument we will hear from the oil and gas industry – that enhancing penalties will drive companies out of the business of offshore drilling. The way I see it, robust safety and environmental standards, and tough penalties for noncompliance with those standards, help to avoid disasters like the BP Deep Water Horizon oil spill. Not only will this save workers’ lives and protect our marine and coastal environments, but this will save money because these disasters cost many times more than the cost of prevention. Just consider these costs:
• In the 1996 North Cape Scandia spill off the coast of Rhode Island, cleanup costs, natural resource damages, and penalties totaled almost $32 million.
• In the 1989 World Prodigy spill at Brenton Reef, Rhode Island, cleanup costs and fines exceeded $35 million.
• And rough estimates of the cleanup costs for the Deep Water Horizon spill range from $2 billion to $8 billion.

Suddenly, $75,000, or $150,000, doesn’t seem like such a very large number.

Mr. Chairman, I would like to offer into the record of these proceedings, a list of some of BP’s violations of Outer Continental Shelf Lands Act regulations, taken from the MMS website. These are exactly the types of safety systems that failed on April 20. May I ask consent to have that submitted for the record? I appreciate the attention of the committee and I thank you in your good work.

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