The People of America's Oil and Natural Gas Indusry

Don't Undermine U.S. Energy Security

Jane Van Ryan

Jane Van Ryan
Posted May 14, 2010

A congressional proposal to raise the liability limit from $75 million to $10 billion on the Oil Spill Liability Trust Fund could threaten the viability of deepwater operations, significantly reduce U. S. domestic oil production, and harm U.S. energy security.

In an assessment of the proposal's potential impact, API found it would be impossible to obtain a $10 billion per well insurance policy, and small and mid-size offshore operators would be forced out of the market.

If such insurance policies were available, the total unit costs of exploration and production could potentially increase by 25 percent, making uneconomic seven offshore discoveries holding an estimated 1.8 billion barrels of oil equivalent.

In a news release, API President and CEO Jack Gerard said:

Precipitous changes to the Oil Spill Liability Trust Fund could undermine our nation's economic and energy security by making oil and natural gas operations in the Gulf of Mexico uninsurable by all but the largest companies...Any necessary changes in the trust fund should be determined after there is a clear sense of the resource needs arising from [the Deepwater Horizon] incident and should be thoughtfully considered with an opportunity for all stakeholders to be heard.

API's initial assessment of the potential impact of the proposal is available here.