relationship, as the president has said, between the industry and regulators. >> thank you. >> senator. .

you can see at the bottom if you have a magnifying glass, the $75 million in liability. above that is the estimated damage to louisiana's fishing estimated at $2.4 billion. above that, you can see the estimateded damage florida's tourism industry, which is estimate at $3 billion. above that, is the dot that shows b.p.'s profits for the first quarter of thii year, $6.2 billion and finally, the large dot at the top, b.p.'s profits for 2009. which are $16 -- $18.8 billion. i also thought it would be helpful to show how that $75 million fits into the total profits for b.p. for 2009 and i

misspoke. the profits were $16.6 billion. but you can see that $75 million is a very tiny sliver of what b.p.'s profits were and i think that is why you're hearing -- we're all hearing so much concern this morning about this $75 million liability cap. so the question that i really have and i'm proud to be on senator menendez's legislation to raise that liability cap to $10 billion, but the question that has been raised this morning is should we have a cap at all on liability and does a cap encourage riskier behavior on the part of the industry? i don't know, mr. perrelli, if you would like to take the first shot at that? >> i think in a situation where you have the risk of a similar major oil spill, you have activity that is risky itself

and highly lucrative and you have companies that are engaged in it in the best position to invest in new technology, to ensure it is safer and that they have sufficient staff and ensure that they are complying with all of the federal regulations. that is a situation where not having any cap i think we think makes a lot of sense and is consistent with the basic principle that they should pay for all of the damages they they caused. >> thank you. there has been a lot of talk about b.p. and b.p. said they will pay the total costs of the clean-up. i think most of us looking at the scenes on television would say that cost of clean-up includes cost of the booms, the cost of people raking in the oil but what else is included in that cost of clean-up? are all of the legal costs the department, the attorney general is incurring now included in that cost of clean-up?

is the time that the department of interior is spending on this included in the cost of clean-up? >> maybe mr. bennett can add to it but certainly the costs that are included include public expenditures, public services, all of the damages to our natural resources and all of the efforts of the agencies to minimize the impact of the oil, the uses of fisher meand the economic impact so it is a broad range of categories. i will say that this is certainly unprecedented in its scope and there may be issues that arise and have been dealt with before. osha is intending to cover a broad range of costs and damages. >> damage includes, reimburse removal cost, personal property

damages, lost profits or earnings, loss of government revenues, government services, natural resource damages. that's the damage side. on the response side, the authority o for driving the response turned leadership under admiral halum. she needs something for -- what we're paying for out of the found support her and cover that cost. the serge of government that we're all part of is new. we vice president ever done this before on that scale. we're still working on some public policy questions. getting teams assigned this together to evaluate this person's -- or evaluate -- that is clearly something they need or want. it is paid for. if i were to go down and do a tour of the site, i would pay operates costs because i don't consider myself part of the response.

>> thank you. >> senator menendez? >> thank you, mr. chairman. let me demend administration for embracing an unlimited liability for economic damages from an offshore rig spill, at least for deep water developments. i've been advocating that we need to lift the cap. i'm going amend my legs to pursue unlimited liability certainly in this regard. i think we disagree about the question of -- under the law, not what b.p. has said. let me get this straight. under the law, b.p. has under all the natural resources cleanup, i understand after that, when there is liability under the law now they only have a $75 million liability cap. is that correct? yes or no? >> i wouldn't characterize it

that way, senator. there has to be no violation of any safety or construction regulations so there are many circumstances in which the cap would not apply at all. state law could be brought into play. >> why would we have put aside a $75 million liability cap? >> when it was enacted, among other things, increased penalties under the clean water act. >> in the absence of those exceptions that you described, they would have a $75 million liability cap? >> if -- under otha, there would be a $75 million liability cap. that would still be there. >> has b.p. entered into a consent agreement with the department of justice to agree to as they have verbalized and

as the administration has said they have verbalized, has b.p. entered into a consent agreement to be liable above the $75 million cap? have they given you any written insurances that in fact they will be liable above the $75 million cap? >> a loft written insurances they provided to cabinet secretaries and as you know, the chairman made such statements to congressional committees. >> well, i would like to see if the department has copy or night. mr. hayes, i would like to see what was written. exxon said all of these many of these same things during exxon valdizz and litigated all the way to the supreme court and it took 20 years and individuals fell off who were damaged because they were not able to

sustainette. is unlegitimated liability available under state law for the spill? it seems to allow state lainlt beyond the cap but says "within such state." would a still like this in federal waters be considered a discharge within a state allowing increased state liability? >> i think certainly a significant amount of damage state coastlines and wan certain distance of the coastline would be damage to that state. i think there will be on the outer continental shelf the rules will be different. >> but there is no question that this is a discharge, not within a state but in the territorial waters over the united states and federal waters. is that correct? >> that's where the initial discharge occurs but there is no question as we see every day there is tremendous damage being

done to the coastline. >> i have no disagreement with that. my point is when we go to state liability it is a lit gouse process. -- lit inchous process. if we in fact believe that between the exceptions that you stated may exist, we don't know whether they are pertinent to this particular incident or b.p.'s statements that they are going to accept unlimited liability i don't see what the retice ens is to lift liability. let me ask you one other question. inspector general of the department of the interior soon releasing a report that describes regulators, allowing m.m.f.'s to allowing company officials to spill out forms in pencil which inspectors would write on top of the pencil in ink and nurn completed forms.

this is just the latest in a series of allegations leveled at m.m.s. is the justice department going to look at these incidents and determine whether there is prosecutions that should be leveled? >> senator, i can't speak about this particular incident but if we get a referal from the inspector general with the dependent of the interior we will take a look at it. >> mr. hayes, do you intend to make a special referal? >> we have just received this draft record from the i.g. last night and i expect the secretary will do exactly what we did when he came into office in january, 2009, on the heel of the i.g. investigations in lakewood, kroll. he specifically referred everything to the u.s. attorney even though that particular investigation had already been processed by the previous

administration. in this case they issued a press release this morning making it clear he plans to aggressively evaluate all of these activities, all of which occurred turned prior administration but he intends to look at the individuals involved and consider prosecution, termination, whatever is appropriate. >> well, i respect what the secretary has done and the ethics reform he has instituted. i do hope that there is appropriate refer els to the justice department. only when we act seriously will the regulators understand that you can't be cozying up to the industry and putting us all at risk. thank you, mr. chairman . >> senator landrieu. >> he clarified just a moment ago for deep water so i'm not sure but a cap of $10 billion.

mr. perrelli you said the intercept is under unlimited. >> where deep water unlimited. he may be deep water $10 billion. if that was in effect today can this new law that we will consider whether it is unlimited as you have recommended or the administration or $10 million as senator menendez, does that go into effect for b.p.? can we be retroactive in our laws? >> congress could indeed provide a retro active law. >> you believe there are constitutional rounds to be retroactive.

do you think in the administration's view that you should have a different cap for deep water, shallow water or -- because you know this drilling can occur in 10 feet of water, 1,000 feet of water, which is considered shallow and then deep, which is 1,000 to 5,000 and ultradeep over 5,000 and the risks of course larger. so how is the administration thinking about this because it is very important to thousands of people in the industry that don't drill in deep water but have been drilling fairly safely in shallow wells, what are you -- are you thinking about the effect of your proposal on the

industry as a whole? >> i think we recognize it covers a wide range of different activities that may have different risks. we recognize that it is complicated and there are many factors that have to be considered, what will create the best incentives for safety. the impact on the market as well. i think we would like to work with the congress on what are the appropriate liability provisions for different types of drilling or different types of transport. overall, i think the primary point is the polluter pays should be at the core of this. these liability provisions haven't been changed in 20 years and i think we have learned they are not sufficient for the risks we face. >> i agree with you on that that they are not sufficient. i will call your attention your to that the premium has soared between 15% and 20%.

for companies like b.p. who are generally self-assured with shell and chevron big enough to handle these increases and big enough to pay the billions of dollars of claims that will eventually come, i'm not too concerned but i am c.p.r.ed about actions that this congress could fake that would make it virtually impossible or very difficult for other independents and small operators and there are thousands that seem to be invisible to some members but they are not invisible to me. i think we have to be very careful about that and i couldn't agree with you more. the polluter should pay. b.p. should pay everything. mr. bent, i've got a minute left. i want to ask you this question. i need to be very clear with you as we met in this my office for sometime and appreciate you coming. what does the law require you to do now to make b.p. pay these

claims in full and on time? do you have the authority to make them do that and if not, do you need some additional authority? >> the current law requires me to notify them that their obligation to advertise and receive claims and make sure they are doing that. beyond that what the law allows b.p. either denies a claim or does not respond a claim within 90 days the claimant may bring their claim directly to me and i can adjudicate it or pay it myself. if they don't get the right answer from b.p. they can bring it to us as a second look and if we pay it and then -- >> that's good to know that not everybody in louisiana is going to have to hire an attorney. some are and they want to and should but we don't want everybody to get a legit claim paid and for the record mr.

president -- mr. president -- mr. chairman. in fairness, i would like to say this on the record. 70% to 80% of their revenues come from outside the united states. when someone asks why they may be headquartered outside the united states, it is because more than 70% of their revenues come from outside the united states. i'll get the accurate information. i'm not going to comment at all about their distribution, etc. people have to understand this. a lot of these companies get the majority of their revenues fromo places in the world. not just in the gulf of mexico, thank you. >> thank you, mr. chairman . i know we're going to -- are you going to have a second panel at some point in time? >> we do. i almost wish mr. meltz could

join us now from the c.r.s. because mr. perrelli, his testimony seems to be a little different than yours on this issue of retro activity. the reason why i'm interested in this, i think it is like millions of americans, we want to know who is going to clean this up and how we're going to pay for it and make sure the taxpayer doesn't become the deep pocket on this and that we also don't wait 20 years as we did with the exxon valdizz case. the constitution disfares retro activity, at least five constitutional provision noted above basically make it very hard to go back and do retro activity. so you seem much more confident. >> and i read his testimony and i think it is more consistent and while he starts from the proposition and a quote that the constitution favors retro

activity. congress legislates it all the time, particularly in a context where there is an important public policy issue. congress is pursuing it in a rational way to try and address potential compensation and cleanup for victims and as the statute that is not penal in any way and covers a broad range of whether it is past and future activities. i think we have strong arguments if congress decides to legislate retroactively. >> in the oil spill liability trust fund or someplace else? >> i'm not sure -- >> how would you legislate -- the discussions have been changing liability trust fund, taking off the cap, things of that nature to make it retroactive. i'm all for them paying but what i don't want to hear is oh,

there is a simple answer. when they were here saying we're going to pay all the legitimate claims and they had a list and start oh, i i don't know about that one. i don't want to have it take us 25 years to get anywhere on that case and then in the meantime there is significant damage that is not dealt with. so it basically says that on these five different issues here, that three of them basically, he says have appear to have modest chance of success and two of them seem to have almost no chance of success. those are those constitutional issues. and so you're thinking of something different? >> senator, i think that our view is that we had a strong chance to defeat any constitutional claims if congress were to lift the caps so i may ballpark the chances a

little bit differently. fundamentally as i indicated congress legislates retroactively quite frequently and so we don't think that would be an issue. i do think there certainly is the potential for breach of contract action but opa itself expressley says and puts everyone on notice that congress has reserved the right to increase penalties and increase costs or damages or the liability or additional retirements. i think that is clear to everyone. >> but it doesn't say retro actively. >> it doesn't but as i indicated we believe that we have strong arguments that defeat any retro activity argument that will be made. >> thank you for your clarity. do you think that we should also look at, you know, since b.p. has had something like $373 million in fines and restitution for environmental violations and

a texas refinery explosion in 2005, a pipeline -- in alaska, do you think there should be some sort of three strikes your out kind of clause as it relates to companies doing business that maybe you couldn't allow them to continue to bid on new leases? >> senator, we would be open to that, certainly. there are other examples and other environmental laws and situations where companies are -- because of a pattern of behavior are for example, not allowed to have that -- contracts, that sort of thing. so we are absolutely open to that. i think we're very interested in seeing these investigations run the ground and not prematurely drawing conclusions but we intend to look at those issues.

>> thank you, mr. chairman . >> do you wish to make a public comment? >> no, i just would like to request that when he provides the b.p. responsibility document to senator menendez that you make it available to the entire committee. thank you. >> let me thank this panel very much for your testimony and you have been very generous with your time. we appreciate it. let me call the second panel forward. that is mr. jonathan ramseur. mr. rawle king, who is an analyst of frnl economics of risk assessment and mr. robert meltz, a legislative attorney are congressional research. i would just advise that the

witnesses that -- our republican colleagues have been invited to a lunch with the president beginning here at noon. that's why they are not in attendance. that explains some of the absences. let me ask each of you to take about five minutes and make the main points that you think we need to understand and then of course we will include your full the sames on the record. mr. ramseur, go right ahead. >> good afternoon, mr. chairman, ranking member, members of the committee. my name is jonathan ramseur and i'm a specialist in environmental policy and congressional research service. i've been asked by the committee to discuss aspects on the oil spill and quality and costs associated with a major oil spill.

liability provisions apply to any discharge of oil from a vessel or facility to navigable waters or adjoining shoreline or the economic zone of the united states. responsible parties include owners and operators of vessels or facilities or lessees of offshore facilities. responsible parties are responsible for removal of oil costs. however a party's liability may be limited. liability limits differ by oil spill source. for example, tank vessel liability is generally based on a vessel's gross tonnage. offshore have their liability

capped at all removeable cost plus $75 million under some circumstances a party's liability may be unlimited. liability limbs do not apply if an oil spill was approximately caused by gross negligence or the violation of an applicable federal safeties construction or operating regulation. in addition, the responsible party must report the spill and cooperate with response fishes. it is currently undetermined whether a liability limbs could apply to the gulf oil spill. regardless, individual sliblet only one component to have framework established by o.p.a.. primary purposes of the trust fund are to include immediate access to funds for prompt oil spill response and payment for

claims in excess of a responsible party's liability cap. the fund is supported by a per barrel tax on domestic and imported oil. at present, the tax is eight cents. a recent estimate made before the gulf spill indicated a fund balance of. $1.6 billion. however, the fund has an incident expenditure cap of $1 billion. when o.p.a. was drafted congress intended this cap was able to cover catastrophic spills. a fund measure which manages the fund would only be able to award claims up to this threshold. it is my understanding such a scenario has not occurred in the fund's history. it could be addressed in several ways. existing federal authorities could be used to provide

assistance in some circumstances. another route of recourse would be the parties to state laws. opa specifically does not preempt state from imposing additional liability relating to oil spills. however it is uncertain thaw state laws would act and it may involve considerable litigation. these issues raise a simple policy question. congress may consider modifying o.p.a.'s framework. potential options for congress include but are not limited to increasing the liability limits so the responsible party would be required to pay a greater portion of the spill cost, to increasing the per barrel oil tax to more quickly raise the fund's balance. concurrently congress could remove or raise or put an

instant cap on the trust fund. it might be noted that the -- 1 billion cap established in 1990 is equivalent to $600 million in today's dollars. authorizing repayable advances to be made via the appropriations process to the trust fund so that the fund would have the resources to carry out these functions. recent proposals have included these proposals. thank you again for the invitation to appear today. i will be pleased to address any questions that you may have. >> thank you very much, mr. king? >> you need to press the button on your microphone. thank you. >> i'll just keep going. my name is rawle king.

c.r.s. has been asked by the committee to provide testimony on financing recovery from large scale natural disasters and to review the amount of insurance that is likely to become available from global commercial insurance market, a for third party pollution liability damages in the aftermath of the deep weard accident. in the aftermath of this event, one major issue that congress may wish to deliberate upon is the willingness of the commercial industry to participate in the oil spill financial requirement program given the proposed increase of the limited liability to $10 billion and also the required evidence of financial responsibility to some level that is yet to be determined. some insurance market experts have asserted that the potential capacity of a third party

liability commercial insurance that is available to meet the retirements is approximately in the range of $1.5 billion. this amount is likely to be far below the oil spill financial requirement for the proposed $10 billion liability limit. companies that engage in oil spill and drilling face many risks. in general, offshore energy business in the gulf of mexico vice versas risks that can be classified in five broad categories whether it is weather perils, marine perils, political risk perils, the deep water horizon incident appears to some to have resulted from the drilling peril, a drilling peril involving a blowout preventer. the running of offshore energy is among the most difficult to

insure, especially in the gulf of mexico. we have hurricanes that often damage platforms and undersea pipeline. the offshore oil and gas insurance market and specialty insurance mact with about $3.5 billion in annual premiums offer insurance coverage for control of blowouts and the cost for drilling the n deep water and the cost of redrilling in the vonte a blowout. i would like to delve quickly into the insurance requirements. under section 1016, parties responsible for the offshore facilities must establish and maintain financial responsibility capability to meet their liabilities for removal costs and damages caused by all discharge from an offshore facility and associated pipelines. this financial responsibility is demonstrated in various ways

clugs surety bonds but the most common method by means to achieve this requirement is through insurance certificates. the problem has been that going forward is that -- by the way, the market thus far has been a soft market so insurance readily available. problem now is the limited capacity in the global commercial insurance market to meet the demands going forward. this is the fundamental problem. how will the offshore energy companies meet their insurance requirement going forward given the limited capacity that stands behind the insurance that is sold in the commercial marketplace. so it becomes an availability issue and to some extent it becomes an sureability issue given the strict liability provisions in the statute. i would like to deal with two

distinct points in terms of the insurance availability issue. some insurance, just based on economics of supply and demand principles and the fallout from the worst possible oil damage in nation's history. some would expect it to only be available at high price. we heard today and quite naturally the cost of insurance has gone up dramatically. given the limited supply of insurance and increased demand for the coverage, you expect prices to go up. and it may go up and also the insurance may not be available at all. commercial insurers concerned about the potential for future massive environmental-related damages may be reluctant tonight commit financial capital to underwrite new risks in the

post-deep water horizon environment until there is greater clarity and legislative and legal climate. they need the to collect the necessary data for evaluation of this risk associated with the civet of the losses that are unknown at this time. so in conclusion, given the magnitude of losses about profitability and the energy insurance business, where there is scarcity of coverage and high prices may emerge following this incident. many insurance market experts will support a more efficient, i believe, and this is based on my research looking at the catastrophe risk and how to finance this risk and given the limited capacity that is available in the energy insurance market that is a specialty market that generates roughly $3.5 billion in premium.

that is a small market relative to the whole global insurance marketplace. most experts believe what is needed is a more efficient predisaster risk finance approach financing large scale oil spill disasters so what i'm saying is the current way of ensuring the risk and transfering it to the insurance market is limited. so the ability now to expand the liability coverage and expect the oil companies to go into the small, relatively small insurance market -- what may beout outside the jurisdiction of this committee, how do you expand the market for this risk? and a prefinancing mechanic anymore could involve alternative risk financing strategies that again, on this committee, that is how the catastrophe insurance market is moving to provide coverage

through the insurance mechanic niche. thank you for the invitation to appear today. i will be pleased to address new questions you may have. >> thank you very much. mr. meltz? >> thank you. c.r.s. is pleased to assist the committee today with its deliberations on the gulf oil spill. i'll just proceed to the constitution at of it. and try to keep the lawyers from glazing over. i do want to say that my estimation of constitutionality questions is close to that of the justice departments although i don't have the detail of what their arguments are. s-3305 would raise from $75 million to $10 billion, the last version i saw the liability limit in o.p.a. for damages caused by oil spills from offshore facilities assuming no

exceptions are triggered. it sets the date of april 15, 2010, presumably to cover the gulf spill. this retro activity has generated a constitutionality debate. it is threw the constitution disfavors retro activity. no less than five constitutional provisions embody that notion that people should be able to know the law and to conform their actions accordingly. nonetheless, each of those five provisions has its purposes and its bounds recognizing that the retroactive application of statutes can be a desirable and unavoidable means of achieving a legit purpose. sierra analysis indicates that challenges to it based on three of the five retro activity provisions in the constitution, have at best a modest chance of

success. claims based on the other two, the impairment of contracts clause and expost facto have we believe almost no chance of success. looking at the three provisions with at least a minimal chance of success, the claim might be based on various things but likely on the extra money that a responsible party in the gulf would have to pay out under a retroactively raised liability cap and -- but as is often said by the supreme court, those who do business in a heavily regulated field cannot claim surprise when the ledge slavet body fortifies the regulatory scheme. most pob attic for a regulatory claim is what the courts call general liability. it is generalized monetary liability.

substantive due process applied to economic legislation. it imposes only a minimum rationalizeation test. it seems rational enough without bringing in the gulf skill. third, to violate the bill of attainer clause, the bill must be punitive, not furthering a non-punitive purpose. congress may assert a non-punitive purpose risk in 3305 in more fairly distributing the costs between spiller and injured persons. the sames of those members of congress who support the bill may be reviewed carefully by the court in this regard for their intent. the other two constitutional provisions need not detains. it doesn't apply to the federal

government and the expost factor only applies to the -- factor only applies to the federal government. it is likely to survive caution isal challenge. b.p. may choose as the associate attorney general said to litigate under a breach of contract theory based on these terms. s-3346 increases both the civil and criminal penalty caps. but s-3305 sets a date of april 15 for the into have civil penalty cap. c.r.s. is unable to see any significant reason why the constitutionality of this should be any different than for s.-3305 . as for the increase by s-43346,

criminal penalty cap, the bill states no effective cap. i understand there may have been an earlier version of the bill which stated a preenactment. no febletive date for the increase in the criminal penalty cap, court would almost certainly assume the date is the date of enactment and the date of enactment also avoids any expost facto. thank you very much. i'm happy to take questions. >> thank you all for your testimony. let me ask, starting with mr. ramseur. i'm sure the -- it would seem to me that we follow the recommendation of the department of justice and eliminate any liability cap, that that brings into question what is the

purpose in setting up this or in continuing with this oil spill liability trust fund? if you're going to say that companies that engage in these drilling activities are liability for any and all damages, and you're going to also put in requirements for them to maintain adequate insurance or solvency to meet whatever damages might result, why would we continue with an oil spill liability trust fund? >> that's a good question. as you know, currently, the trust fund serves as a backstop, if you will. if the liability is indeed capped in any particular situation, the excess amount of damages could be paid by the trust fund but under a scenario

where liability caps do not exist, the trust fund would have different purposes. its primary purpose of provide immediate funds to the federal agency like to coast guard or the e.p.a. who respond to an oil spill would still be necessary. >> but, as i understand it, that would be a short-term -- short-term need that at least in the case of rethat we're currently dealing with, i believe b.p. said they are going to reimburse the government for those costs and although the oil spill trust fund is -- liability trust fund is advancing funds to meet the need right now, b.p. is committing to go ahead and reimburse for that. am i right about that? >> i have seen similar

statements in the press but as others have indicated today and is allowed turned statute, the responsible party, assuming that the liability cap remains intact and as has been discussed today, down the road, the responsible party could submit a claim to the trust fund for moneys paid out in excess of their liability limit. now i'm not sure offhand what that time frame is. i can look into that further. >> it does seem to me, just thinking about it that either we can sort of put our emphasis on eliminating limits on liability for companies that engage in these activities and -- and have much less, if any reliance on an oil spill reliability trust fund. that will be one regime.

another regime would be to substantially increase the amount of money in the oil spill liability trust fund and expect in the future that individual companies would have somewhat limited liability, could continue to have somewhat limited liability but the trust fund would have been funded at an adequate level to meet any needs that occur. is that a fair way to think about it? >> yes, and that's the current situation. one potential policy matter that congress may consider, if you remove the liability caps, if -- it were to occur in the future, the current situation serves as a backstop to help people receive awards in a very short

amount of time without going through litigation and if you remove that backstop then i'm not sure what would occur. then we would be looking at the trust fund as a short-term -- as a way to speed up the -- the ability of folks to get compensated for damages done. if -- in case someone wanted to litigate the liability but we still might adopt the recommendation of the department of justice and go ahead and try to put in place a legal regime that ensured that the trust fund would be re-emerged at some stage. >> that's certainly one avenue to take. >> is one reason we need the liability trust fund is we don't always know who is responsible

for the spill so we want someone cleaning up the spill even before you determine liability. >> absolutely. that is one of the primary purposes of the fund, to have access for an immediate response. >> we had that unfortunate situation at puget sound. that's why i bring that up. if it were a liability limit to the spill, would you say it is nearly certain its constitutionality would be challenged? >> i would imagine that given the broadness of many constitutional principles and given that different judges and i'd logical stripes take -- ideological stripes -- it might very well be worth their while to consider a challenge. >> then if that is the case, then it is this legal gray area, could it take years to resolve in a court system? >> it certainly could, yes.

i think, initially, you would probably have a you know, a trial court decision. i think saying it is constitutional and then it would go through appeal and possibly to the supreme court. it is a little hard to predict how many years that full spectrum of procedures could take. >> well, if you look at exxon valdez it took 20. so that's an idea. >> thank you all three for your testimony. it has been helpful to us. we appreciate it and we'll conclude the hearing with that. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute]

>> the house natural resources committee continues the congressional investigation into the gulf of mexico oil spill tomorrow morning. witnesses include interior secretary ken salazar and the head of the minerals management service. live on c-span 3 at 10:00 eastern. in a few moments, senate republicans speak with reporters about their meeting with president obama. in about 20 minutes, president obama tonight at a fundraiser for california senator barbara boxer. after that a briefing by house republicans on an initiative for public input into their congressional agenda. >> c-span, our public affairs content is available on television, radio and online and you can also connect with us on twitter, facebook and youtube

and sign up for our scheduled alert emails at c-span.org. >> president obama met with senate republicans on capitol hill today. after the meeting, party leaders spoke with reporters for 15 minutes. >> good afternoon, everyone. the president came up and we had

a spirit discussion on a variety of different issues that we are all dealing with these days. it was a private meeting so i'm not going characterize what he said but i will just mention one issue that i raised with him and i thought we could have broad bipartisan agreement on it and that is the sanctions bill against iran that came out of the backing committee and is now in conference. regretfully the administration seems not to want to get that bill and we -- i know i've had to answer to my conference and i think the democratic leadership has had to answer to their conference as well. whatever happened to the i sanctions bill? this is one of those rare bills that could actually make a difference. i'm perplexed frankly about why the administration doesn't want to go on an get the bill and have the president sign it. i fear it may be because he would then have to make a

decision whether to use the sanctions or to waive them but in any event, we do know there has been a lot of discussion about partisanship this year, there is literally overwhelming bipartisan support for this iran sanctions bill. i hope the senate and the house and democratic leadership will wrap it up and send it down the president and sign it soon. for that, let me turn to senator kyl. >> thank you, leader mcconnell. one of the issues that was raised buzz by my colleague john mccain and i added a little bit to it relative to the immigration issue as per pertains to arizona. senator mccain made the point that it was not help to feel the debate to have the arizona -- and tried to make the point that it wasn't a good idea to try hold hostage the securing of the border in order to get

comprehensive immigration reform passed. i know there is some feeling on the other side that if the border is secured then conservatives would feel less likely to support comprehensive reform. from our perspective, whether that is true or not and i don't think it is, it is important to secure the border simply because of all the reasons why that is important and ironically, securing the border will make it easy easier, not more difficult to later on get comprehensive regime. we did make a strong argument that we should try everything we can. it can be done and one of the things we'll be doing in a few minutes is offering a few amendments to the bill to provide a modest amount of additional funding to target things we think can make a difference in securing the border. >> it was good to see the president back here. we all know him, like him and appreciate his willingness to engage in a spirited exchange

with the kind we had today. without character sizing his views, i think it is fair to characterize most of our comments and statements were about the three husband is most americans have front in their lives. jobs, debt and terror. we have fund mental differences of opinion. it is harder to create jobs. the so-called financial regulation bill makes credit harder to get and more expensive and making it harder to create jobs. as far as debt goes, the president's budget proposes double and tripling the debt over the next 10 years and the stimulus bill puts us well on our way to that. we simply have a large difference of opinion not likely to be settled until november about taxes and spending and debt. whether we ought to be focus ond

government jobs or creating an environment in which we could have more private sector jobs. >> well let me just -- i think it is always good to have the president come up and speak to our conference and certainly with discussion we had today. i think what is important is not so much the symbolism of bip but the action of bip. what we have -- bipartisan but the ac-action of bipartisan. what we see is an buyerly partisan health care bill passed and a nearly partisan financial services reform bill passed. we haven't seen the matchup between rhetoric and the actions to follow through. obviously we were very interested in the financial services reform bill in offering amendments that were constructive that happened have bipartisan support and whenever we try to do that with that legislation and previous efforts on previous pieces of

legislation, it has been met with partisanship from the other side, from the white house. we appreciate the opportunity to interact with the president but at the end of the day it comes down to not so much the rhetoric as the actions that back it up and so far we haven't seen those. >> clearly one of the topics that is on everyone's mind is that of energy and the subject of energy came up in today's luncheon with the president the suggestion has been that energy legislation that the president would support is comprehensive energy legislation. how are we defining that? i would suggest that we have a comprehensive energy bill that passed out of the energy committee last year. it is bipartisan. it is -- it is wide in its scope. it works to we deuce emissions and moves -- reduce emissions and moves toward an energy that we desperately need in this

country. it has all of those component pieces. the only thing it doesn't have is the kerry-lieberman label on it. i would suggest if we're looking for that bipartisan energy bill that we can advance, we need to move to a bill that is ready to go, a bill that has that bipartisan support and a bill that can really work to move this nation further towards the energy security that we're looking for. >> as you have heard, one of the topics discussed at the luncheon was the need for immigration reform. yesterday, a current student and one former student at the university of texas at el paso were murdered in juarez just across the river from el paso, texas. you add that to. 23,000,000 people who have been killed -- 23,000 people who have been killed in the cartel wars since

fwicks. you can see why because of -- since 2006. you can see because of the spill overeffect and the impact on american families, border security is more of an issue than perhaps it has been at any other point in time.

objection. mr. leahy: mr. president, i support congressional action to move past the policies that discriminate against men and women serving andanting to

serve in our nation's military on the basis of sexual orientation. i commend admiral mullen, the chairman of the joint chief of staffs; defense secretary gates and the president for their leadership on this important issue. america is defended by the finest military in the world. i know the pride that my wife and i felt when our youngest son, mark, whose birthday is today, joined the u.s. marine corps out of high school. i feel that there should be be no place in america, including in our military, for discrimination. while the country and congress work to move forward, some still labor to hold us back. how ironic that the policy of noiscrimination elena kagan sought to encourage while serving as the dean of harvard law school is poised to become

the law of the land, while those who oppose her nomination continue to distort h lawful actions to ensure that the schools follow nondiscriminatory policy. i support the don't ask, don't tell policy. i hope all senators will. mr. president, on a further matter, two weeks ago president obama nominated elena kagan to succeed justice john paul stevens as associate justice of the supreme court of the united states. much has been written and said about this nomination during the last two weeks. actually there's been far too much talk about the process and too much partisanship surrounding this important matter. let us refocus on the qualifications of this extraordinary nominee, remembering tha a supreme court justice is there not to serve a republican or a democratic administration, but all 300

million americans. when the president announced his choice back on may 10, he talked about solicitor general kagan's legal mind, her intellect, her record of achievement, her temperament, her fair-mindedness. no one can question the intelligence or achievements of this woman. she's at the top of the legal profession. she's no stranger to breaking the glass ceiling. she was the first woman to be the dean of the prestigious harvard law school. she clerked for two leading judicial figures: judge abner mikva on the court of appeals for the district of columbia circuit and then on the supreme court for one of the most extraordinary lawyers and judges in american history: justice thurgood march -l shall. as an advocate, thurgood marshall helped change america for the better by bringing cases that challenged racial discrimination. he won an extraordinary 29 of

the 32 cases he argued before the court. one of the most outstanding records of advocacy before the court, including the landmark case o brown vs. board of education, which helped bring an end to racial segregation and education in america. a blot on our country that was finally removed by that case. and despite his obvious legal qualifications, when thurgood marshall was nominated to the cond circuit court of appeals by president kennedy in 1961, his nomination was stalled by opponents in the senate before he was eventually confirmed by a bipartisan vote of 54-16. now, 40 years later, it's elena kagan who is serving as the solicitor general of the united stes, the first woman in america's history to serve as

solicitor general. i've long urged presidents in both political parties to look outside what i've calked the judicial -- what i've called the judicial monastery. when confirmed, elena kagan will be the only member of the supreme court who did not serve as a federal appeals court judge. and when the president introduced elena kagan to the country, i was interested to hear him talk about learning from justice marshal that behind laws there are stories, stories of people lives shaped by the law, stories of people's lives that might be changed by the law enforcement the president said her understanding of law is not merely intellectual or ideological, but how it affects the lives of people. we heard solicitor general kagan talk about the importance of upholding the rule of lawmakers enabling all americans to get a

fair hearing. she has broken this glass ceiling when she was appointed as the first woman to serve as solicitor general, as she did when she was -- became the first woman to serve as dean of the harvard law school. and there are historic accomplishments. in fact, as dean, elena kagan worked well wit all ideological components at harvard. she took action to bring more conservative viewpoints at the institution. she encouraged civil discourse. those are skills that will be useful in a sharply divided supreme court. having counseled the president, looking outside the judicial monastery -- i've made that recommendation to every president since i've been here, beginning with president ford -- the one president who actually did that. i was struck that t first wave of aacks by senate republicans

to this nomination was that she lacked judicial experience, including by some who would praise president bush's nomination of harriet miers, praising her as someone who had not served as a judge, calling her a wonderful choice who would fill very important gaps in the supreme court. of course now that a democratic president is nominating, they reversed themselves. and what was a great idea with a republic president is not a terrible idea with a democratic president, and they say the lack of judicial experiee is a matter for concern. it's troubling. it's a matter that warrants great scrutiny. i think it was ralph waldo emerson who once said that a foolish consistency is the hobgoblin of little minds. they are not suffering hobgoblins, but i would say the republics should not apply a double standard to the nomination of this qualified

woman. this criticism of her is somehow unqualified, because she lacks judicial experience. it is also ignorant of our history and our constitutional government. it's very recently that the path to the supreme court became so rrow. indeed, nearly half of our supreme court justices were nominated to the court from a position other than a judgeship. let m just mention a few of the distinguished justices without prior judial experience: chief justice john marshall, justice louis brandeis, justice frankfurter, justice byron white, justice robert jackson and justice william rehnquist. of course, senate republicans did not voice any such concern before the american people elected president obama.

ey certainly had no such concern when president bush was mang those nominatio. nor did senate republicans express any concern when president bush made other nominations to the federal courts from his close advisors and his team. now, unlike these republican critics, i've always championed judicial independence. i think it's important that judicial nominees understand judges, they are not membersf an administration but they're judicial officers. they should not be political partisans, but judges uphold the constitution and the rule of law for all americans. now, i welcome questions to the solicitor general about judicial independence, but let's be fair. let's listen to her answers. let's set this overheated rhetoric aside.

let's be fair to solicitor general kagan, fair to her distinguished record. there's no basis to question her integrity, no reason to presume she will not be independent. and before someone questions the independence of this nominee, sherbd have a basis -- they should have a basis. i know of none. no one should presume that this intelligent woman who has excelled during every part of her varied and distinguished career lacks independence. i know of no basis for such contention, and i look forward to the beginning of the judiciary committee. if we're going to talk about inconsistencies, i was amazed, flabbergasted to hear concerns about the schedule i set for her nomination. i tried to set the same schedule

as that for justice roberts during the bush administration and justice sotomayor during the obama administration. but i have to admit i didn't hit it exactly. we're taking a day longer for elena kagan than for john roberts or sonia sphoeur. to do it -- or sonia sotomayor. to do it exactly the same we'd have to start it on sunday, and i didn't think it was fair. we're starting on monday. i only note, mr. president, that when a republican president nominated a man to the supreme court, the schedule was fine. when a democratic president nominated women to the supreme court with exactly the same schedule, suddey it's not a

fair schedule. well, maybe i'm old-fashioned, maybe i'm influenced by my wife, my daughter, my three granddaughters. but i think the rules ought to be the same for men and for women. and so that's why her schedule is the same, save that pefbgy sunday, which -- pesky sunday, which means it will take a day longer than john roberts. but we got as close as we could. and let's stop the crocodile tears on the other side about the schedule. they didn't complain when it was a republican man being nominated with that schedule. don't complain when a democratic president nominates a woman and it's the same schedule. so i lookorward to these hearings. that's what solicitor general kagan will finally be given the opportunity to answer questions

the american people and open-minded senators will find mind, workers who lost

their lives, their families, the people of the gulf experiencing this catastrophic siation firsthand. mr. de -- yesterday i was up

for it -- i was fortunate enough to a accomplish -- a company others -- a company others observing the consequences of this accident and a joint response of our government agencies, and bp, and the many volunteers. it is a sobering reality to see it will beginning to impact the shorelin and no -- know that this was not under control. i saw many people working night and day for weeks to fight this bill and to prect the gulf, and i think we all express our gratitude to them for their extraordinary effort. tay we examine the liability, financial, and penalty provisions of the law related to this accident. there is urgency and our

efforts and we need to ensure that those on by the as and are fully compensated and a system in place that probably allocate risks and losses. based on what i've learned so far, i believe that we have a system in dire need of repair. current law caps the responsible parties damages other than the cleanup costs at $75 million, which clearly is nowhere near the damages their results -- that have resulted from this disaster. equally as troubling, the law requires the secretary of interior to adjust the amount of these caps at least every three years to reflect significant increases in it to improve our price iex, yet the limit on damages for offshore facilities h not been increased cents the law was passed in 1990, 20 years of inflation ignored. victims of the disaster will certainly wonder why there should be any cap on their

damages, and why those responsible should not simply be required to pay the full amount of the harm that they caused. bp has stated that it will pay all legitimate claims and that it will not insist on 75 million-dollar cap currently in law. but even accepting this is true, we have a broken system that is in need of repair predict oil spill liability trust fund financed mostly by taxes on oil is intended to cover higher levels of damages and spread that risk in excess damages among the industry as a whole. yet it is led to the paying $1 million per incident. congress over the years has been inconsistent in enacting taxes to fund this effort, and that taxes that have supported it are scheduled to expire in 2017, so we obviously need to look at that as well. the law also requires operators

in the offshore environment demonstrate certain levels of financial responsibility to ensure that they can accommodate losses that they may cause. however for facilities like this, the maximum amount required is $150 million, and the standard requirement is only $35 million. this amount has not been increased in decades. we obviously need to fix this. finally, there are civil and criminal penalties available to publish those who violate safety and other requirements. these are intended to be a deterrent to playing fast and loose with the rules and creating a safety risk, but the civil penalties were set in 1990 at $20,000 a day and have been raised only once to $35,000 a day. the law requires the secretary to adjust theseenalties every

three years to reflect increases in the consumer price index and that has only occurred sporadically. so we have our work cut out for us. it is a complex area of law and policy, and a number of experts to help us think through how to fix these problems, and i look forward to their testimony. i know senator white house is here to speak briefly about his legislation in his ear for civil and criminal penalties. let me call on senator murkowski first. >> thank you, mr. chairman. i want to thank you for agreeing to hold this important hearing. as you mentioned in your statement, our visit yesterday to that all with senator whitehouse, i think, was a very important visit, a very important trip to understand the impact of the deep water rise and -- deepwater horizon spill,

understanding at the spill unfolds, as we see the impact to local residents and to the marine environment. i can assure you that what i saw yesterday's certainly has reinforced my commitment to help make things right for all those whose livelihoods are being so drastically affected by this disaster. when it comes to the issue of liability associated with major oil spills, i do not think that there is any state that is represented here on this committee that has a more direct exrience and certainly a more immediate concern than the state of alaska. with the exxon valdez tragedy occurred, it was a horrible incident at that time. it was a long and very sad part of alaskas history.

the litigation that followed was years in being resolved. the litigation over punitive damages literally took two decades to resolve. that was in and of itself an absolute tragedy and i am committed to ensuring that we do not see a similar situation unfold with this cold spell. i one of our committee to hold this hearing because there's been considerable discussion about the liabilities of the deepwater horizon spill and what part of that liability is limited or not limited and i think that there has been some mischaracterization out there that bp is only going to be responsible for $75 million of this bill. mr. chairman, i read -- if i really thought that the federal

government was born to protect companies that have billions of dollars of assets to pay only $75 million regardless of the ultimate costs and damages from the spill, that the spill victims could be hung out to dry, i would be the first to introduce legislation to correct what would clearly be a flaw in the system. reality is that the $75 million figure is drawn from just one provision on strict liability in the oil pollution act. and it has nothing to do with the expressly on limited -- the on limited liability provided for cleanup costs. it is important to recognize that it has nothing to do with the large authorization for unlimited damages allowed under various state laws. and not every state has unlimited liabilitso we do need to take that into account. i think tha we of all stated are around this table here in

this committee room with the ceo of bp in front of us that we must hold and we will hold bp accountable. chairman, if you have strutted -- you have stated the affirmation that was made by p that they will -- by bp that they will pay for and provide for all of those costs. those costs that are incurred as a result of this oil spill. we were again in the gulf yesterday with secretary napolitano and secretary salazar. they too reiterated many times throughout theourse of the day that bp will be responsible for the damages or the cost associated with this bill. i think that we need to listen carefully and constructively on how we hold companies liable,

how we incentivize stronger safety and normal safeguards as it pertains to the $75 million liability cap. my own opinion is that we need to increase this liability to reflect inflation,he change in financial and risk portfolios that are associated with certain types of exploration. and i hope that as we consider some of these suggestions here today and going out into the future here, we consider how we make changes in ways that are not arbitrary. right now there is a proposal out there that the liability cap needs to be $10 billion. is that the right figure? i do not know. maybe it is. maybe it needs to be higher or run ltd., maybe it needs to be somewhere in between but i thin we need to make the time -- take the time to ensure that we're

building good policy on this. if congress decides to impose a strict and direct liability of additional $10 billion on top of the unlimited cleanup and the on limited losses that can be brought against responsible parties in state court, i think we have to consider what the potential consequences might be. will there be jobs lost? particularly in the gulf coast our energy security perhaps weakened? we need to be considering these aspects and make sure that the victims of this tragic spill and god forbid that any future spills are justly compensated in a fair and expeditious manner. i think it's important how we deal with this liability cap, increasing it, but i am reserving judgment on what the appropriate figure might be until we have examined it in a

way that secretary salazar just as the two last week. i welcome the witnesses that we will have the day. i welcome senator whitehouse for his perspective and i thank you, mr. chairman, for your leadership on this issue. >> thank you very much. senator whitehouse has introduced legislation to revise the civil and criminal provisions. we welcome him to the committee to make a statement about that bill. go right ahead. >> thank you, senator bingaman. [unintelligible] first of all, thank you for holding this hearing. i encourage you to review the penalty and liability framework governing offshore drilling and enact chans to this framework so that we can prevent future disasters like the one now unfolding in the gulf. thank you all for inviting me for making a few remarks about my outer continental shelf plan

bill. the bills seeks to enhance penalties for faili to meet workers' safety and environmental hazards on offshore rigs. this is just one piece of the public. my colleague has introduced two 0 bills to raise liability caps and to eliminate birth the caps. the co-sponsor of both of these bills, and i commend his leadership on this issue through look for to working wi them and all of my colleagues in the senate to forge a strong deterrent to the system to discourage irresponsible oil drilling rig just yesterday, the chairman indicated that we visited louisiana. the chairman, the ranking member, senator landrieu, senator durbin and others to inspect the disaster caused by the bp deepwater horizon oil spill. since the tragic explosion this allred on the night of april 20, which killed 11 workers, ihas been spewing

uncontrollably in the deep water of the gulf and a rate that has been likely on an estimated -- underestimated. it is another thing entirely to go see the entire massive oil slick spread across the gulf with black smoke billowing off of the water where the events taking place. tar balls are washing up on the beaches vital to louisiana, alabama, mississippi, and florida. troopersnd other gold for german talk about the collapse of their industries. some of these people are second and third genetion fisherman. this is truly the only light that they have ever knowand they worry that it could be gone forever. there a similar economic concerns but i am sympathetic to the concerns of our fishing community and this is in

community. my bill wed enhanced penalties in the fall in three ways -- increase in civil penalties from $38,000 per violation to $70,000 per violation per day. when the violation constitutes irreparable harm to fish and other wildlife, increase penalties from $38,000 per violation per day to $150,000 per violation per day, and increase the upper bound of criminal penalties from $100,000 per violation per day to $10 million per violation per day. but goal of the outer continental shelf program is to have been formally sound wall and gas exploration. this will go a long way to deter oil companies from cutting corners on safety measures that can prevent disasters like the gulf spill. we need to take a comprehensive look at the penalty and liable

to framework that covers offshore oil and gas drilling and to substitute requirements to protect our workers, our coastline, and the marine environment from devastating oil spills. we may want to consider banning drilling at certain debts until we're satisfied. senator bingaman, i applaud your efforts and today's hearing. one thing i'm certain of is that the current civil and criminal system is inadequate. the five largest oil companies worldwide may 20 $3 billion in profits last year. the current liability penalty limits are inconsequential in the face of those record- breaking profits. i want to close by anticipating an argument we will hear from the oil and gas industry, that it dancing penalties will drive companies out of the business of offshore drilling. the way i see it, tough penalties for noncompliance with those standardhelp to avoid disasters like the bp deepwater horizon oil spill.

not only will it save workers' lives and protect our arena and coastal interments, it will save money because these disasters caused many more times the amount of prevention. consider these costs. in the coast of will -- and the spill off the coast of rhode island, they totaled almost $33 billion. in rhode island, another spill when up to $35 billion. suddenly $75,000 or $150,000 does not seem like such a very large number. mr. chairman, i would like to offer into the record of these proceedings a list of some of bp's violations of outer continental shelf reservations taken off their website. may i have that submitted for

the record? >> we're glad to have that included. >> i appreciate that and i appreciate the good work. >> thank you for testifying in your leadership in introducing the bill that y have put forward. we have two panels and we will excuse you at this point and we have two panels today. experts -- first from the administration, and then from the congressional research service. the first panel is thomas perrelli, the associate attorney general. second is david hayes, the deputy secretary of interior, and third is cig bennett, the director of the coast guard's national pollution funds center. if they would all come for police -- come forward please and take their seats?

if there is no particular preference on your part, why don't we start with mr. perrelli, and if you could give us your views and the first five or six minutes, and then we will include all of the statements in full in the record, and then we will have a question. mr. perella, go right ahead. >> thank you, chairman rakowski. >> be sure that you push all appropriate buttons. >> senator sessions. >> what is the role on submitting testiny? i think we got mr. perella is this morning at 6:00 a.m.. we've got a lot and our committee. what is the expected presentation of written testimony? >> what is our role? our role is 24 hours. >> i know people are busy and all of you are busy but it does help when our staff has more time to review it so that we can

do -- be a little better prepared >> -- better prepared. >> we will urge people to comply with our 24-hour rule. >> my apologies for the late arrival. >> will you pull that up or speak more directly into it so that we can all hear it. >> thank you for the opportunity to testif about liability and responsible issues related offshore oil production. before i began a lot like to echo the condolences to the families of those who lost their lives into those who were injured in the explosion and sinking of the. -- the deepwater horizon. the explosion and fire have created a potentially unprecedented environmental disaster for the people and fragile ecosystems of the gulf coast. this says created a massive response led by president obama. there numerous federal officials

on same from the very beginning. the activities have been focused on stopping the oil spill and preventing and mitigating its effect. the department of justice has been fully engaged in this response efforts. our mandate is to make sure that we recover every dime of taxpayer funds and ensure tha the united states expands and recovering from this tragedy. we will ensure that the american people do not pay for any of the damages for which others are responsible. at the direction of the attorney general, we have been monitoring the sittionn the ground, coordinating with the state's attorney general and working with federal partnering agencies and natural rusty's -- resources trusties to makeure that we track every cost incurred. 're looking ahead to issues of financial response ability and liability, mature -- many of which are under the oil polluti that. as you know, opa was passed in the wake of the exxon valdez

disaster to provide specific legal authority would feel and what the consequences o oil spills. all but gives federal officials the ability to designate responsible parties who are required to clean up oil spills and then pay removal costs and damages. the coast guard has designated bp and transocean as responsible parties for this bill under opa. in its current form, but contains additional caps that may limit the law -- the responsibilities. caps on the size and nature of the value -- the vessel or facility. bp has already stated in several places that it will not seek to limit its payments and that it will not look to the federal government to reimburse it for claims that it paid in excess of the applicable cap. we expect bp to uphold this commitment. the united states government is committed to making sure that all responsible parties are held fully accountable for the cost and the damages they have imposed on our people, our communities, and our natural resources. the liability provisions of the

opa have not been updated and some time and it is clear the need to be revised to better reflect the principles that polluters could bear the costs associated with the harm they caused to the natural enviroent. bp has recognized its obligation to fully compensate all those bearing damages in the current oil spill. for the future, we need to change the legal framework to ensure that there is no arbitrary cap on corporate responsibility for similar major oil spill three we will work with congress to develop a program proposals and a transition. thank you, mr. chairman. >> mr. hayes, we're glad to have you before the committee. go right ahead. >> thank you, members of the committee. i'll make a few oral marker in my written testimony for the record. i have been as the focus my testimony on the authority as a companion to what mr. perrelli is talking about in terms of the

oil pollution that. i am delighted to testify on the subject. obviously our first focus right now is on the oil spill disaster and the response to it. secretary salazar set me down to the gulf the morning after an and as several of you've visited with secretary salazar yester day. there was an excellent trip a i was delighted that you're able to go. while our primary focus is on the disaster and refined into it, its appropriate that you are obvisly taking up these broad policy question 3 we are also looking at important policy questions with regarding this disaster and how to respond to it. it is for those reasons that the secretary salazar commissioned an independent cost analysis to be done by the national academy of eineering that will be folded into the new presidential commission that will examine all aspects of this disaster and, with the proposals potentially and how to ensure that it will

n happen again. also, secretary salazar will be livering to the president ter is week and interim measures report to do with safety issues associated with ongoing activity on the outer, michelle. and most notably an important, this committee is, the secretary has -- no. -- reorganize the minerals management service already to take apart the -- to take it apart. in his reorganization, he removed the revenue producing side from those two organizations prove we look forward to working with you on those issu. with regard to ipections and enforcent, this has been a very sigficant interest of the secretaries. .

we know that the original was focused on under the pollution act, but the intercontinental shelf act is the mechanism for ongoing review and approval, and if necessary, compliance for the oil and gas industry in terms of offshore activities that the department of interior has purview over. in that regard, i note that the original penalty authority came from the 1978 land act amendment, and the original fine was 10,000 per day per violation. in the 1990 act, there was an amendment to the intercontinental lands act that

increased that fine for civil penalties to $20,000 per day per violation, plus it established the ability to adjust the upwards under the consumer price index, and in 1997, mms revised the penalty amount up, under the cpi, $25,000, and in 2003, it was again revised up because of the cpi to $30,000 per day, and in 2007, it was again revised up to $35,000 per day, and last year was the latest cpi analysis, and it had not gone over the threshold to raise it further. o raise it further, and we are based on statutory structure that has been in place forome time, and as an administration, we a absolutely open to consider amendment of the act that consider this for civil penalties and the $100,000 criminal penalty, and we look forward to working with the

committee on those issues. thank you. >> thank you very much.+ mr. bennett, go right ahead. >> good morning, german bingaman, ranking member, members of the committee -- chairman bingaman. i have been the director for two years, and i was chief of the division for four years prior to assuming my current condition. my role as the director is threefold. first, i use amounts congress has made available from the l spill trust fund for so-called emergency funds. second, i sure these responsible party -- the response will party is dealing with damages. if claimants are not fully compensated by a responsible party, they may present claims for payment from the fund.

third, i recover federal response costs and claims paid by any and all responsible parties. with respect to the deepwater verizon response, -- horizon response, a federal response costs have totaled $72.40 million. fund costs included the direct costs of the coast guard and partners as well as funding that has been provided to 14 different state agencies for state response efforts. while we have exercised are one- time advancement authority to move money from the parent fund to the emergency funds, the emerging scale of this emerging response effort is burning through these funds. this is important, because while the responsible party may be reimbursing those costs, they go back into the parent fund, not the emergency fund. we believe we may exist the existing balance in the

emergency fund as early as june 5, much earlier than previous forecast. legislation is on the hill, and it is critical we obtain that authority as soon as possible. to date, b.p. has reportedly received over 25,000 claims and paid over $28 million. most of these claims had been for must have been, -- loss of income and wages. bp has opened 20 processing centers with over 432 personnel in the field to assist claimants and has established an 800 number as well as web-based claim capabilities. b.p. has the ability to accept 6000 claims per day and advises it can search through 15,000 claims per day. this is putting 2500 adjustors

in the field if necessary. my staff has dilly conversations regarding any concerns regarding the efforts to submit claims. the polluter pays. fedor response costs -- federal response costs. we anticipate prompt payment. going forward, they will continue the strong response we have sustained since the first day of this incident korean communities and businesses have suffed as a result of this bill. the regime is working to assure a robust response that those damaged are compensated and that the polluter pays. the department supports the legislative proposal, and we look forward to working with congress to adjust the regime appropriately. thank you for the opportunity to testify today. i look forward to your

questions. >> think you all very much. i will start with a few questions. mr. perrelli, your position, the administration's position is that we should eliminate the cap on liabili that is currently in the law and not have any cap. is that correct? >>ell, i think it is important to understand that it covers a wide range of activities that might have the risk of resulting in a similar major oil spill, such as we are seeing currently. we do not think there should be an arbitrary cap on responsibility. >> let me ask, mr. hayes, do you agree with that position, or is that something that interior is still assessing? >> we are totally in line with the department of justice on this, mr. chairman, and the

administration. >> there continue to be reports in the medium about permits being issued for drilling in the gulf and waivers being issued with regard to environmental requirements. we have tried to nail this down, a belief. secretary salazar -- i believe. secretary salazar was indicating there would be no further drilling permitted in the gulf until these studies and investigations had been done. could you clarify? in short terms, where we stand on this? what operations are still being permitted? which operations have been suspended or stopped? >> i would be happy to, and i appreciate the chance to clarify

this, mr. chairman. first, let me say that as you would recall from last week, there is a requireme that the minerals management service have exploration pns within 30 days under the continental shelf lands act, and that area where there is a categorical exclusion is used, and beuse of that statutory requirement, exploration plans continue to be approved, but those do not allow for drilling. the drilling decision is a later decision under another thing. there has to be a special affirmative act to allow for drilling. as for the drilling, the department put a stop on processing new apd permi. >> specify "a" for those of us who e not experts? >> applications for permits to drill. >> all right. >> and there are basically two

types of drilling permits, if you will. there is the initial apd, which gives you the authority to put a new hole in the ground, and then, there can be situations where after you have started drilling, there are safety issues that arise or other circumstances that arise that require you as a driller to move that ongoing drilling operation around. those are called sidetracks, revised permits to drill. ose are all for ongoing, already-started drilling ctivities. what the department has stopped is approving new apd's for current drilling activities where there is a need, often for safety reasons, to do a bypass oro do what is called a side track. those have been approved, but those are not new apd's. i think that is the reason for the lack of clarity, but in the

deep water, there have not been any new apd's implemented since april 20. there were two that were approved between april 20 and may 6, and they were both suspended. no apd's fisa since april 20 have been allowed to go forward and do new deepwater drilling. >> well, thank you for clarifying that. let me ask sort of the other side of the koran, when we are talking about possible liability limits. the other side of the coin seems to be requirements for financial responsibility. what are we going to require their for companies that go into the deep water and it drill? i asked, mr -- i ask, mr. hayes, what are your thoughts on that?

>> it is appropriate to revisit that financial assurance requirement. that seems anachronistic, frankly. $150 million of financial insurance certainly for a situation like this for a company like b.p.. unfortunately, it does not appear to be coming into play here, but we do think it is inappropriate, just as we look a potentially revising upwards the statutory penalties. we look at revising upwards the financial assurance requirements. >> senator jackowski. -- barbara mikulski. >> is it correct to state then that boasts -- both of you would agree that we should not have the current 7 $5 million -- liability cap -- murkowski?

>> i think for the future for activities such as deep water drilling, with is a risk of a similar major oil spill, we think there should not be that cap. >> are you differentiating between deep water and shallow water exploration? >> i think we have to work with congress and the committee on the whole range of activities. there may be shallow water drilling, deeper water drilling, but certainly in the context of any activity that could result in a major oil spill are in a position to have an arbitrary cap. >> something that plays in there? >> certainly, we should look at the risks and look at transition rules, as well. >> and, mr. hayes, i want to make sure i am not misinterpreting york -- your point. >> is always good to pay

attention to your lawyer. >> secretary salazar has made it very, very clear that b.p. as the responsible party will be paying and that b.p. will not be expect to be held to the cap. does the administration the think we need any specific legislation to make this true to ensure that this is the case? >> i think we're going to continue to work to ensure that b.p. lives up to its commitment, so they have made that commitment. they take it seriously, and we will work with them. the legislative proposal is transitioning into a new liability. >> so, basically, going forward.

>> we are focused on going forward. >> let me ask about that, because as the $75 million strict liability cap is in place right now, it only applies in places where there has been no gross negligence, misconduct, or regulatory lack of compliance, so i am assuming that there is a possibility or a likelihood that any of these three could be alleged, in which case the light cap is removed altogether? >> that is correct. >> oh, in fact, while we're talking about here with a cap y or may not, and the main not is perhaps quite likely, it may not be in place for this particular deepwater horizon incident. >> i don't want to speculate. if there is a violation of any safety, operational, or

construction regulation that may have caused the spill, the caps would be removed. >> i will not asked to speculate, but i will ask you if the department of justice is aware at this point in time of any incident, incidents either proven or alleged of the responsible parties in gauging in gross negligence, willful misconduct, or regulatory noncompliance? >> senator, i do notant to comment on any pending or contemplated investigations. there are many things yet to be developed. so i cannot give you any insight on that currently. >> let me ask you, mr. bennett, because when we were in louisiana yesterday and had an opportunity to hear from the fishing industry and the small- boat charter industry as well as the oyster fishermen, there was what was happening with the processing of claims, and there

was concern that, in fact, claims were being expedited, that there was a process that was transparent, and that worked for those who had been affected with their businesses and being able to go out and fish or charter bookings that had been canceled. the question to you is, in your office's role in overseeing this claims process, are we sure we have sufficient number of claims offices, that we have staff that is sufficient, that we have staff that can deal with -- for instance, we have got a big vietnamese community within the shrimping industry. do we have translators there. , are we fully set up at the interior, he was pretty

adamant that there be follow-ups with the admiral as part of the following meeting, because what we heard is that, in fact, the process tt is being set up is not meeting the needs of the local people. can you comment on that? >> yes, i would be glad to. the law requires us to require the responsible party to advertise and collect claims, and bp has been very responsive, as we oversee and make sure they are complying with taking claims. we welcome any complaintor any concerns about the claim processing. we are not getting a lot of concerns sent to my office. if you care about that, we want to know about that. they say they have opened 28 offices. they have been opening capacity at a rate of about 28%, and the claims rate has grown at about

12% and is leveling off. it might change when we start getting more damage claims, but they are set up to get about 6000 capacities' a day, and they are currently getting about 2000 a day. whether there are telling us, what it appears from the data we have, is that they are meeting the requirement. as soon as we got word about vietnamesend spanish and croatian communities, we approached.p. and said, "we expect you to handle that," and the immediately got translator services and immediately started advertising in the media, so b.p. has been responsive to any of our requests for direction for any concerns that we have become aware of. >> thank you. >> the comment that was made that b.p. has indicated that it intends to pay all legitimate claims.

obviously, e question is, what is legitimate, but aside from that, is the b.p. -- is their representation legally binding in any way? legally binding on them they simply indicated they would pay legitimate claims. six months from now, one year from now, is that a legally binding commitment? i would not want to make judgment as to how that would be used in a court of law down the road. they certainly made it publicly. also not to seek recourse against the fund, which is also a significant commitment, so we intend, whether it is in a court of law or elsewhere, we certainly intend to have them up hold that commitment. >> so you inte to represent that commitment as something that is binding? >> as i said, i cannot speak of that is something that would be

biting in a court of law if that were to be litigated down the road. >> the representation today might be very different than the actions six months or one year from now so i appreciate the fact that b.p. has made these representations. i would feel me comfortable if there were some binding requirements or that they were legally binding. let me ask. the letter you received at the justice department. there were about 18 of us the other day. asking you to take look at an announcement by the owner of the deepwater horizon rig. it was announced in switzerland, and i think it is in switzerland where they have employees, and they have 10 employees in texas. it reduces their tax obligation

to the united states. in switzerland, they say the intent to distribute $1 billion to their shareholders at this point in time in. is that troublesome to you? we have written a letter asking whether it is troublesome, because there may be substantial liability here for transocean, as well, and if they go ahead and distribute the potential $1 billion in the face of potential liability, would that not be a difficult circumstance fr people's is live said been dramatically affected? >> senator, i do not think i've actually seen a copy of a letter, although i have been told. all of the responsible parties, regardless of whether, however transocean or another responsible party spends funds, our goal is to get back every dime for the american taxpayer. >> you will have just received this then. would you take a hard look at

this? this does raise questions. we had three parties at this table, each of which was pointing in a different direction saying, "it is not our fault. it was someone else's fault. trsocean in switzerland, they want to gi $1 billion back to their shareholders at a time or i think there might be very substantial liability questions th would suggest we would want them to have that money available. you also talk about having the money for offshore oil and gas development, and i think you talked about, mr.ayes, you talked aut a significant increases, as well as mr. p erlli. i think you alluded just a moment ago that may have decision pnts with respect to whether it is shallow or deep well, the size of the project, the size of te company, and so

on. define for us, if you will, what you're thinking is going forward with respect to liability. significant increases? because that suggests you believe thereught to be a cap, if so, what should the conditions be attached to a cap? >> it was structured requiring entities of all sizes to pay all removal costs plus some amount of damages. yet to be determined. we want to very much work with the committee and look at the different factors, ok for different types of oil exploration or transport, the factors needed to ensure that coanies invest sufficiently in safety, the factors needed to ensure that funds at the end of the day are sufficient to make sure that all claimants are paid out. i think we also want to look at the market impact that may affect different types of entities that may be involved in transporting small amounts of

oil on the coastline versus to link -- drilling in very deep water. those are different activities, each one requiring a different look. >> are there ways where you can take steps to make legally binding their representation by b.p., or at least ask them to make is legally binding at this point, number one, and number two, that is the one side of the potential liability, and the other side is $1 billion being dispersed to shareholders at a time when you may want to see that that is available for liability with transocean. are you interested in working on both of those to see that the folks who are affected by this oil spill are protected? >> i will take that back and give that further consideration, senator. >> senator sessions. >> thankou. mr. perrelli, walk throh the

statute that provis liability coverage. it has some good things in it. i believe that it can be improved, and i have offered legislation to do that. with regard to the damages on cleanup, the cost of all of the cleanup, is there any question that the responsible party, in this case b.p. is responsible, are the cleanup costs, the marshes, the beaches, and that kind of thing? >> there is no doubt, senator, that they are responsible for all of the cleanup costs. >> the 7 $5 million category -- $75 million category, is this aulos that fishermen or shrimpers' may have -- is this a loss that fishermen or shrimpers may have?

what is capped under this bill? >> the $75 million cap applies to, if it applies, as we talked before, there are many situations where it would not, but it applies to a wide range of damages, and that includes the kind of economic damages that you're discussing, the cost of public services that may be required in response to disasters such as this, as well as damage to natural resources, the impact once oil is removed, trying to revive that habitat, and that is an area, although there have been very significant hundreds of millions of dollars of impact on natural resources. >> but under classical state law, that has not been abrogated. this is the kind of loss of one might file under federal law in federal court, i presume -- this is it the kind of lawsuit --

this is the kind of lawsuit. there are possibilities that under classical state pollution or nuisance or trespass-type actions, you could file those lawsts also. >> we expressly allows states to impose a greater liability or requirements. that is correct, senator. >> the legislation that i signed on to -- retroactive liability. i know that senator dorgan has said, "should we do this?" i have read some complaints, concerns, really, that this raises constitutional questions about the ability of congress to troactively alter this situation. the department of justice, does it have an opinion about that? >> i will start first by noting

that there would be many situations in which, for example, if the cap did not apply, that there would not be a concern about retroactivity, congress legislate retroactively all of the time. while there might be arguments made under other provisions, we think we would have a pretty strong argument in response that congress can legitimately legislate in order to iure cleanup -- ensure and cleanup would not run afoul of constitutional protections. >> expect that to be contested? >> one could envision it being contested, either the constitutional matter or in a breach of contract action, which may be more likely. >> mr. perrelli, with regard to the investigations that are ongoing, i believe there are

people on that team, to what extent are the fbi involved in that? >> senator, i cannot comment on any contemplated or pending investigation. >> well, i would just suggest that if there is a possibility of a criminal investigation, and everyone is presumed innocent, but if there is, the fbi should be involved in that. my observation is that their expertise in those types of matters exceed the agency, although they have great skills in many ways. with regard to the shallow water drilling, mr. bennett, is that within your jurisdiction? we do have thousands jobs. i understand they will soon and if all shallow water drilling is stopped -- they will soon end,

because it does not take long to get those wells completed, and the ones on going arsine wrapping up. what is your expectations -- and the ones on going are soon wrapping up. >> senator, i will take that one on behalf of the secretary of the interior. the policy statements that i described -- policy statement that i described and clarified with the chairman is in place only until the 30-day report is delivered to the president later this week, so this was essentially a time-out on the drilling of new deep water wells, in particular, after may 6, though, we also stopped approving shallow water drilling apd's as well, but that is just until the end of the week, and so, the issue has been raised appropriately as to what should happen after the safety report

delivered to the president, and we are looking at that issue and are cognint of the fact that ther are important distinctions between sallow water and deep water rigs. >> thank you. centre to approve >> thank you, mr. chairman. mr. perrelli, earlier, i laid out some horrific patterns with b.p., and today, i want to talk about the transocean company since the accident in the gulf, and let me what you very specifically through the timetable. at our hearing two weeks ago, the top management at transocean said they had nothing to do with the accident. they said it was b.p.'s fall, they were just, in fact, followin b.p.' orders. two days later, after they exalt themselves of responsibility, transocean went off to federal

court in a houston. there they filed a claim under american admiralty law which governs maritime accidents, and they said again and they are not liable, but if they are, their liability ought to be capped at $27.60 million. on the day after that, may 14 announced at their sharehoers' meeting in switzerland that they're going to distribute $1 billion in profits to shareholders. given that pattern of activity, and i have followed it since our heing, i went out and put together this letter with 17 of our colleagues as co-signers, asking you all to investigate, and by the way, we told the administration -- not only did we send it to you, we told you that i was going to ask about it this morning. here is my question. would you agree that transocean shifting $1 billion in funds from the company to its

shareholders and its federal court filing under the admiralty law could posbly be a way for transocean to either ebay's or limit its liability? >> let me respond by focusing particularly on the limitation of liability action, which we ar not a party to that action, but we have already responded to transocean, and i think we will also make a filing in that case, explaining in the strongest possible terms of what transocean is attempting to do there is inappropriate. >> you believe what transocean is doing is inappropriate? >> the finding of the limitation of liability act, seeking to limit their liability them $26 million, the statute that they are seeking to use is a statue perhaps best known for being used by the owners of the titanic in an attempt to limit their liability. it was expressly said it does

not limit liability. it further said expressly does not limit the liability that states may imposed for oil pollution activities. >> what does the department intend to do in response to the recent pattern of activity by transocean? it seems to me that what is going on here is pretty clear. for a company that said it did nothing wrong, this company is working pretty hard to insulate itself from being held responsible for an accident involving its own drill, rig, and crew, and this seems to me to be a place where the department really needs to dig in and do a thorough investigation. are you all prepared to do that? >> as i said, i cannot comment on any contemplated investigation, but on the question about whether they can limit their liability, we believe in the strongest possible terms, and we will make that clear, that they cannot. >> i certainly hope he will look into this thoroughly, because

given what ey said before the committee, given the fact that just in a matter of days, they went out and took this action, then went forward and delivered, in effect, the dividend -- it seems to me this is a pattern of activity that requires e department to look into this thoroughly, because the decision to transfer this enormous amount of money out of the accounts, given all of the events that have taken place in recent weeks, suggests to me that if the government does not look into this, the government is simply not following through in an area that i think is central for the government to have credibility in terms of its response to the tragedy in the lf. i appreciate your saying that their conduct is inappropriate. i hope you will look into it thoroughly, because this pattern of activity, and i consider it a

pattern, literally, since the week that they came here, it is unacceptable. i cannot say it is illegal at this point, but it certainly should be unacceptable, given the tragedy we have seen in the gulf. thank you, m. chairman. >> senator? >> thank you, mr. chairman. thank you for having this hearing. yesterday, the headline in "the wall street journal," it says it all. the u.s. was not ready. gulf crews are camp -- improvising with outdated maps. outdated maps. today is day 36. oil continues gushing into the gulf's. no one is sure how much oil is leaking. we were first told it w 1,000 barrels paul the -- oil continues gushing into the gulf.

no one is sure how mu oil is leaking. we were told it was 1,000 barrels per day, and now we have been told it is 5000. getting tough with b.p., administration torn on getting tough with b.p., secretary salazar says they have missed a deadline after deadline. secretary salazar says that if b.p. is not doing what they are supposed to be doing, we will push them out of the way. but just yesterday, the coast guard commandant thad allen said that to push them out of the way would mean to replace them with what proved -- with what? the response seems delayed. we have tried many things from the top hat to the jump shot. in testimony just last week to this committee, secreta salazar promised that last saturday or sunday, triggers

would be polled to trigger the dynamic killed. saturday past -- triggers would be pulled. still no solution. turday passed. sunday past. -- passed. the american people are angry, angry at b.p. and angry at the administration. it is time to use the other boot. b.p. is responsible for paying all of the cleanup, regardless of costs. .the white house administration has some responsibility. there arelapses in regulatory

enforcement. officials of bypass laws. -- officials have bypass laws. >> thad allen is the national incident commander operating on behalf of the government under the laws that this congress passed. there are the cleanup responsibilities. >> can you talk about the upcoming plan, if there is one

for this dynamic kill? >> the secretary is in houston as we speak. the final preparations are being implemented for a dynamic kill attempt. if the pressure teing proves sods, a decision wi be made la tonight's -- late tonight. >> senator sanders? >> thank you, mr. chairman. i think we all understand we are looking at one of the most significant ecological disasters in the modern history of our country. we understand that nobody can fully estimate what either the economic or ecological damages would be.

all of this takes place, i must say, at a time when the american people are having significant doubts. we are looking at a multinational corporation, b.p., which earned $5.60 billion in the first quarter of this year. we are looking at a company which many americans are now believing ignored many safy factors as they proceeded rapidly in order to move that project along. we are looking at a company which tonight, refused to put information out there. we still do not know today how much oil is leaking. we were told 1,000 barrels per day. it may be 100 times that. we still do not know. we see a company which many americans think has not been aggressive to stop the flow was

a going forward with the cleanup. i want to get back earlier and asking a very, very simple question. i think you dodged it a little bit. should we eliminate the cap completely and hold b.p. 100% responsible? so that they pick up all the economic damages as well as the environmental damages? a very simple question, yes or no? >> senator, bp has said they are committed. >> i am sorry. >> i think as i indicated, our proposal to lift the cap is for the future. as indicated to senators sessions, we also think that we would have a strong argument if congress ultimately decided to -- >> what b.p. has said does not mean much. you might be the last person in

america who trusts and believes what bp has said. it does not matter. one year from now, the cameras will not be there, and some fishermen will have to go to court to get dage from b.p.. now is the moment. do weift the cap, or do we not? what is the answer? >> as i indicated, our proposal with the cat is focused on the future. >> so that is not focusing with b.p.? your position is that we should not lift the cap on b.p. for this oil spill? >> as we indicated, we are focused on the proposals for the future. >> mr. chairman, i would hope that this committee and the senate would move aggressively to move and a very different direction than the administration is indicating. for taxpayers, it is beyond comprehension that you have an oil company taking $5 billion in profits in the first quarter and this year at the same time we have the nation with a record-

breaking deficit that the taxpayers of this country should be asked to pay one nickel, one nickel in court. just because b.p. says something, i am glad you believe them, but you may be one of the few people in america who trusts them. >> senator, i do not believe this is a question of belief. we a committed to recover in every single dime from b.p. as i said previously, there are many situations in which the cap would not apply and many other statutes that may be available to pursue damages from b.p. as well as state law, so we think we will be able to recover, regardless of b.p., every single dime that has been extended by the taxpayers. >> the best way to go forward, simply lifng the cap. that is it. ank you very much. >> senator bennett?

>> thank you, mr. chairman, and thank you to the witnesses. let's look ahead, mr. perrelli. i appreciate your comment about that, and i will leave it to the experts to try to get this spill stop and get everything under control. -- stopped and get everything under control. ok, this happened because people were lax, that is the headline that senator grasso quoted. even the company was lax or the regulators were lax, or both relax, and therefore, if we tighten up all of the procedures, nothing of this sort will ever happen again. the other view is, hey, accidents happ. we have drilled thousands and thousands of these wells without any incident, and statistically, this is a very small percentage,

of difficulty, and accidents happened with automobiles. accidents happen with airplanes. accidents are going to happen anytime you have a large number of activities of this kind. i would like reactioto that. is this just a very small percentage, that accidents happen, so we can go, statistically, as far into the future as we have in the past before we get another ooe of these? or is this, indeed, the circumstance where there were lax practices, either on behalf of the company or the regulator. i do not want to have to determine that, but was there something here that could be prevented in the future? and then the second side of that, if we do move in the direction that, by virtue of the cap, drives the non-majors out

of this business so that only the majors survive, because only the majors will be big enough to deal with the cap, what are the chances that they will be able to get sufficient insurance if the cap is set so high or the tapas listed all together so that businesses decisions made by these boards, the risk is too great, and we would drop all activities as far as drilling is concerned. look into the future and give me some responses. mr. hayes, you are probably the one who has thought about these issues the most, so i will let you go first, but anyone else who has views, i would like to get your response. >> thank you, senator. i would say that, with regard to the first point, this is an

unusual accint. that is clearly the case there were two independent, serious things that went wrong. the blood on the one hand and the failure of the blowout preventer on the other. each of those independently is extraordinarily rare. to have them both happen at the same time is even more extraordinarily rare. -- the blowout on the one hand. this is why we are committed to doing a thorough investigation and a top to bottom evaluation of whether we have the right regulatory system, whether we are state of the art, whether there is enough oversight of industry, and you will see later this week in the report that the secretary will be delivering to the president, some ideas in terms of additional interim safety measures that we might consider, that the president

might consider imposing, because this type of accident, where of though it is, -- rare though it is, is unacceptable, and it cannot be allowed to happen again, and that is our commitment to work with you and the congress to make sure we have a system in place so that we never have to deal with this again. i will defer to mr. perrelli on the second part of your question about the cap issue. >> senator, every day, we get more information about the risks of offshore drilling, and we think the liability provision is appropriate, as we learn more and more about the risks. you raised a number of questions about insurance. i would say that today, the major players in this industry aralready involved in a mix of insurance, and they are today

facing the prospect potentially of unlimited liability, both because there are circumstances in which the caps would not apply, but also because of state law and other law that is out there, so i think thatu