Obama Aide: Offshore Drilling May Be Best for Large Cos

WASHINGTON (Dow Jones Newswires), July 2, 2010

The White House's top energy and climate adviser said companies drilling for oil offshore should be able to pay for any damages caused by spills, even if removing a cap on damage claims means small companies can't operate offshore.

"Maybe this is a sector where you really need large companies who can bring to bear the expertise and who have the wherewithal to cover the expense if something goes wrong," Carol Browner, special adviser to U.S. President Barack Obama on energy and climate change, said in "The Big Interview," a WSJ.com video interview that will be posted online at 10 a.m. EDT Friday. Eliminating a $75 million cap on liability for oil spills "will mean that you only have large companies in this sector."

On other topics, Browner said the Obama administration will accept almost anything in the form of an energy bill this year "just to get started." She said the Obama administration is mindful of the effects of a deepwater drilling moratorium and wants "to get people back to work," but also needs to understand what caused the BP oil spill. She cited widespread "frustration" over the spill, and said that while BP has more damages to pay, the company is "healthy" and can afford big costs.

Discarding the cap for oil spills is a potent issue on Capitol Hill as oil continues gushing from a broken BP pipe on the floor of the Gulf of Mexico. Small companies have warned that discarding liability limits would shut out all but the biggest companies from offshore drilling partly because obtaining insurance would become impossible without limits on exposure to liability.

BP has already paid out more than $132 million in damage claims--promising to honor all legitimate claims in spite of the statutory liability cap--and under pressure from the White House promised to put aside $20 billion into a fund to compensate for economic losses.

"There are still other damages to come--for example natural-resource damages that BP will ultimately have to pay," Browner said. Oil is expected to continue gushing until at least mid-August, when the first of two relief wells is supposed to shut off the well. "There will be oil--even with all of the containment systems in place--there's probably some that will leak," Browner said. "That's why these relief wells are so important."

Still, Browner said BP is "a healthy company" with "a lot of assets." She added that "we don't want to see BP go out of business because we've got lots of claims that need to be paid."

Browner didn't say whether there was a limit to what BP could pay before running into financial distress. The $20 billion escrow fund isn't a limit.

Senate Democratic leaders are planning to use a broader energy package as a vehicle to discard the liability cap. The energy package has stalled amid opposition from coal and manufacturing states to mandatory reductions in greenhouse-gas emissions across the economy. Last year, the Obama administration called for economy-wide emissions reductions. But the White House has become increasingly willing to consider a scaled-back approach, suggesting action on an energy bill may be possible this year.

"There's a real interest in getting started and sometimes you can't get everything that you want but you can get something that you need," Browner said.

She implied that capping emissions on only electric utilities is one option that the Obama administration would consider--and suggested that Sen. Olympia Snowe (R., Maine) might be a possible Republican ally. Until now, only Sen. Lindsey Graham (R., S.C.) had been negotiating with Democrats on climate legislation.

"Something that gets us started is something we will take seriously," Browner said. Browner suggested that Obama was not ready to give up on setting a cap on carbon-dioxide emissions. "He continues to believe that a cap on carbon is very, very important."

The Obama administration has imposed a moratorium on deepwater drilling while a presidential commission conducts a six-month investigation of the BP disaster. Oil companies have been pushing the Interior Department to lift the moratorium, saying that new safety regulations could allow drilling to resume.

Browner said lifting the moratorium will depend on the development of better spill-response plans and an understanding of the cause of the Deepwater Horizon explosion.

"We want to get the answers as quickly as possible," Browner said. She said that "we're keenly aware of the impact of the moratorium."

Browner said she didn't know why some Gulf Coast governors haven't activated as many National Guard troops as authorized by the federal government to handle tasks like dealing with tar balls washing up on shorelines. Some 17,500 troops have been authorized, but only about 1,600 have been called up, she said.

"The governors have not chosen to take advantage of it. I will be honest with you--it is a mystery to us."

Copyright (c) 2010 Dow Jones & Company, Inc.

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