05/17/2010 05:39 pm ET Updated May 25, 2011

Democrats Reject GOP Counter-Offer On BP Liability

Senate Democrats on Monday rejected a Republican legislative counter-offer to the BP crisis that would raise an oil company's liability for economic damages in the wake of a spill to the equivalent of one-year worth of profits.

Late last week, Democratic leadership tried to push forward a vote on a piece of legislation that would have raised the cap on oil company liabilities from $75 million to $10 billion. But the party was blocked by Sen. Lisa Murkowksi (R-AK), who argued that by raising the level of liability that high, the government would make it prohibitive for small companies to drill offshore.

On Monday, the Republican Party, led by Sens. David Vitter, R-La., Jeff Sessions, R-Ala. and Roger Wicker, R-Miss put out the first GOP counter-proposal. Under its design, a company responsible for a spill would have to pay either the last four quarters of its profits or double the current cap ($150 million) -- whichever one is greater -- to help with economic damages caused by the spill.

Republicans pushing the proposal said it would "dramatically increase" the industry's liability. And, indeed, in the case of BP and the current spill in the Gulf, it would.

But Democratic negotiators say the GOP proposal is arbitrary and limited. What if, for example, an oil company that has made little or no profits during the course of the year is responsible for a damaging spill and that spill ends up causing more than $150 million in damages?

"Oil damages fisheries and coastal communities without regard to a polluter's profits," Sen. Robert Menendez (D-N.J.) said in a statement to the Huffington Post. "Coastal residents and businesses should be fully compensated for economic damages from a spill, even if the company that owned the oil well is having a bad year. One of the companies that leased the well currently spilling in the Gulf is valued at $40 billion but made no profits last year -- should a company like that not be liable for damage it may cause? "

Menendez is the point person for the Democratic Party on legislation responding to the BP spill. And a leadership aide confirmed that his position on the Republican counter-offer is shared by the party's top brass.

"The overall effect would be to not guarantee that affected small business and fisheries get their due," said one high-ranking Senate aide. "In this case, the oil rig was owned by a company that happened to make a big profit last year [BP]. But there are plenty of rigs owned by oil wells that are less profitability, but they all have the potential to spill as much oil as the other and cause as much economic damage... It is basically a crap-shoot based on who is the responsible party."

As it stands now, Democratic leadership is planning to forge ahead with the Menendez bill even at the risk that it could be stopped again in the Senate. A unanimous consent vote is scheduled for Tuesday, a leadership aide said. "And we will ask several times this week if we don't get consent," the aide added.

The White House, too, appears to be on board Menendez's bill, though it has declined to endorse a specific cap for economic-damage liability. Asked about Murkowski's logic that a $10 billion figure would dissuade small oil companies from drilling in the Gulf, White House Press Secretary Robert Gibbs said the following:

I think somebody has to understand that if the project that you're undertaking has the potential to cause the type of damage that exceeds what is -- what could or may happen, that the law take that into account regardless of the size of your firm. I think if -- I think that's, quite frankly, a series of steps based on common sense to ensure that the protections are there for people in the event that something catastrophic does happen.