07/28/2010 07:17 pm ET | Updated May 25, 2011

Liability Cap Fight May Sink Senate Spill Bill

Top Senators argued Wednesday over whether oil firms should have to pay for all spill-related damages, and whether that requirement should be applied retroactively to BP. The dispute could sink the chances of passing even the already-weakened Democratic energy bill.

At the Capitol Wednesday, Senate Majority Leader Harry Reid discussed his energy and oil spill legislation, a far less comprehensive package than he had hoped for, with no cap on carbon emissions.

Republicans have already denounced the lighter legislation, citing concerns over the Democrats' proposal to lift the $75-million liability cap on economic damages from offshore spills. Unlimited liability would make it financially impossible for small and mid-sized companies to afford the insurance necessary to operate in the Gulf of Mexico, Republicans claim, and they are circulating an alternative bill.

One critical difference between the two bills: The Republicans' liability cap could not be applied retroactively to cover BP's oil spill in the Gulf. Reid has already condemned this move on the GOP's part. The Republican bill would also end the Obama administration's six-month moratorium on deepwater drilling for any rig that meets new inspection and safety requirements.

"Republicans should come to their senses and remember that they represent the American people, not BP," Reid spokesman Jim Manley said in a statement. "Republicans want taxpayers to foot the bill for BP's disaster and allow BP to use endless legal battles to run out the clock on those whose livelihoods they destroyed."

Republicans denounced the bill at a Capitol Hill press conference Wednesday, calling it hastily-crafted. Senate Minority Leader Mitch McConnell complained that the Democrats' bill will hurt the oil business.

"Our energy bill would give the president the ability to raise the liability caps on economic damages done by companies like BP -- without driving small independent oil producers out of business," McConnell said.

Reid plans to bring his energy bill to the Senate floor next week, but its prospects don't look good, having already elicited the wrath Senate Republicans and even some Democrats. Sens. Mary Landrieu (D-La.) and Mark Begich (D-Alaska) oppose the liability cap and have suggested a liability cap of their own that would require all oil- and gas-producers to share the liability for a spill collectively.

Sen. Lamar Alexander (R-Tenn.) charged Wednesday that Democrats will not allow GOP amendments to be voted on, and Reid has not denied it. When asked point-blank by a reporter whether he would allow Republican amendments Reid smiled and said, "We'll see."

WATCH McConnell blast Reid's energy bill here: