IPPA president leads independent oil, gas producers in fight against proposed legislation

Source: Independent Petroleum Association of America (IPAA)

America's 5,000 independent natural gas and oil producers drill 90 percent of the nation's natural gas and oil wells. Independents have operated responsibly in the Gulf of Mexico (GOM) for decades and hold 90 percent of leases, producing about 30 percent of GOM oil and producing more than 60 percent of GOM natural gas. 

"On behalf of America's domestic oil and natural gas producers, let me first say that our thoughts go out to the families and communities affected by the tragedy in the Gulf of Mexico,” said Bruce Vincent, chairman of the Independent Petroleum Association of America (IPAA) and president of Swift Energy (SFY).

"The entire industry is dedicated to working together to protect the environment and to contain the damage. Many of our member companies have offered supplies and services; others are directly helping with the clean-up efforts. This is certainly a time when actions speak louder than words. 

"There are many emotions, understandably, involved right now. Controlling the well and protecting the environment are the main priorities today. And we are urging the federal government, as they consider new regulations and new offshore exploration policies, to first allow the facts in this incident to be investigated.
"IPAA believes in the following principles: 

1. Any company operating offshore or onshore should be fully responsible (financial and otherwise) for all clean-up efforts. 

2. There must be a fund to ensure that those affected by such incidents (i.e., fishermen, tourism, local businesses, etc.) will be able to fairly recoup lost costs without being caught in fierce litigation with large corporations. 

3. The oil industry, collectively, should contribute to this fund and ensure its long-term viability. 

"These principles are already a part of federal law in the Oil Pollution Act of 1990 (OPA 90) and the Oil Spill Liability Trust Fund (OSLTF). Certainly, some changes need to be made to update out-of-date OSLTF limits with additional industry funding. 

"Unfortunately, some in Congress are quickly moving forward with legislation that will have profound, negative consequences for independent producers. They are proposing changes that would increase offshore liability limits to unrealistic levels under the OPA 90 -- $10 billion, $20 billion, no liability limits. 

"Make no mistake, independent producers that operate in the offshore are not 'mom-and-pop' operations; they are well funded organizations that have been responsible operators in the offshore for more than four decades. However, these liability legislative proposals will empower multinational and foreign oil companies while creating an impossible financial challenge to other American companies who compete with these corporations in the offshore. It will result in thousands of lost American jobs and increased reliance on foreign oil. The proposals do not achieve any of our national security, domestic energy or economic priorities, namely to provide for more American-produced energy, jobs and fewer oil imports. 

"IPAA is now working with Congress to clarify the major points below: 

Currently, OPA 90 imposes liability on offshore producers for removal costs and $75 million in damages. 

Independents must rely on insurance to assure that they can meet the OPA 90 requirements. Insurance is not available at the $10 billion level. 

Insurance is currently near its worldwide capacity for this industry. 

Without insurance, independents would have to leave the GOM and other US offshore areas, independent production could be shut down and new drilling would come to a virtual halt. Thirty percent of GOM oil and 60 percent of GOM natural gas production could be lost. 

These consequences are not justified based on the performance of independents in the offshore.

"IPAA is also working to remind Congress that a significant aspect of OPA 90 was the creation of a trust fund filled by crude oil taxes that is intended to be used by injured parties to compensate them for economic damages instead of requiring lengthy litigation. IPAA supports the expansion of this industry-wide fund to ensure that future costs and claims are covered."

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