the polluters pay, and where you have a risky activity that is highly lucrative in a place where the entity that is most able to ensure safety is going to be -- we think it is inappropriate weather is a prospect of a major oil spill to not have a cap on liability. >> but you are going to drive towards concentration in the industry, perhaps? >> i think we talked about -- we think there are a lot of activities covered under this group and different liability regimes as under the current law may be appropriate. i think our focus is on where there is a prospect of a similar major oi spill, and i think most of this activity, and mr. hayes can talk about -- i think most of the deep water activity is smaller players. >> thank you, mr. chairman. >> thank you. let me just advise folks that

the order that people have arrived in, and, of course, if some of our republican colleagues arrive, they will be inserted, and then we do have a second panel, so let me just adviseeverybody that we would like to do all of that before lunch. senator? >> i do feel compelled before asking a question to make an editorial comment, because one of the things that i can see happeningn terms of where we focus accountability is the fact that we are now looking at more broadly the consequences of a philosophy of deregulation that has gone out on -- gone on now for many years, and we see that on wall street. we see that with minerals management service's. we see that across the board.

there is an inspector general report out, documented the fact that there were unscrupulous usages of government funding from 2005 to 2007, in industries that they regulate, and i raise this only because this white house is dealing with holdovers from the previous administration that believe in deregulation, backing up, not having the accountability, letting the industry basically make the decisions, even the minerals management service's chief could just step down was from the bush administration, and i mention that because i can hear where this is going in terms of pressing that somehow this is all about the obama administration, and, mr. chairman, we have 107 nominees pending right now that the president does not even have his own team in place, so i am happy to hold them accountable, but

let's get their team together first, and they do not even have their team together. i do not want to deal with olstein that was in place right now, the holdovers from my philosophy, frankly, that has caused us a lot of trouble, has caused us a lot of problems, that philosophy of deregulation and not protecting public interest. let's put the new team in place and let the presidt have his new team, and i am willing to be as tough as anyone on it. let me talk about b.p. and ask your comments, because when we look at the efforts of the history of b.p., it is very disturbing beyond this horrendous situation that we have right now. in march 2005, at a b.p. facility in texas, 15 deaths, 170 injuries. after an investigation, it was determined that b.p. cut maintenance and safety controls in an effort to reduce costs.

the oil spill right now does not appear to be an isolated incident. it is part of a track record of cutting corners on safety, which is, frankly, very concerned that has cost workers in their lives. b.p. failed to correct safety have birds. there was the 2005 explosion as well as news safety hindrance -- hazards found since then. they were fined for a huge oil spill in alaska in 2006 because of a frozen pipeline, and according to a recent study, b.p. refineries where responsible for 97% of flagrant violations found in the refinery industry. and most of these citaon from inspectors found that their behavior was an egregious and willful, so my question is, given their track record, at

this point, is there any reason or evidence today that bp may have been grossly negligent or in violation of an applicable federal safety construction or operating regulation for any of the actions right now that would put them in a position to waive the current $75 million cap? >> senator, you correctly state that those are circumstances in which the cap wld not apply. our focus now has been on cleanup, and i do not want to comment on any pending investigation on this matter. >> does anyoneelse want to comment? clearly, this is a record of serious concern about cutting costs and raises a lot of questions about how we got into this situation without safety provisions put in place in case something like this happens, even though we were told this would never happen, and we do not have the answer, and this

has gone on for a month because somehow this was never going to happen, but it does raise serious questions about a number of different things, and i hope we are going to focus on this in a much more direct way in the future. >> i would be happy just to reinforce the notion, senator, that we intended to absolutely look at the entire b.p. record as part of the overall investigation that is now under way. i fully expect the commission that the president announced last saturday will also look at whether there is a pattern here r this company and do some evaluation of the adequacy of the regulatory progr, and in that regard, i appreciate your comment that the inspector general report that came out today reinforced the notion that prior to the time this administration took office, there were serious problems at the minerals management service.

secretary salazar, in the very first month of coming into the office, established a new ethics procedure for mms. the focus at that time was on the revenue side. we ended the in kind program. we require a special ethics training. the secretary today has asked the inspector general as a follow-up to that report to see of any ethical violations have continued in connection with the new orleans activities of the minerals management service. the report the inspector general has does not indicate that they have continued, but we want to make sure they have not continued. this is definitely a rk in progress as we deal with what has been too cozy of a relationship, as the president has said, between the industry and regulators. >> thank you. >> senator. .

>> if we look at this first poster, you can see at the bottom, if you have a magnifying glass, the $75 million in liability. above that could is the estimated damage to louisiana's this industry which is right now

estimated at $2.4 billion. above that, you can see the estimated damage to florida's tourism industry which is estimated at $3 billion. above that, is the dots that shows bp profits for the first quarter of this year, $6.2 billion. finally, the large docked at the top are bp's profit for 2009 which are $18.8 billion. i also thought it would be helpful to show how that $75 million fits into the total profits from be paid for 2009 and i misspoke, the profits were $16.6 billion. you can see the $75 million is a tiny sliver of what bp's profit four.

-- what bp's profits are. the question that i really have and i am proud to be on the legislation to raise that liability cap to $10 billion but the question that has been raised this morning is, should we have a capital on liability? that is a cap encouraged with your behavior on the part of the industry. i don't know if you would like to take a first shot at that. relli, 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 safernd 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 cleaup. 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-u 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 d'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. leme get this straight. under the law,.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 tt 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 ste 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 nouestion 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 litouse 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.'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 o allegations leveled at m.m.s. is the justice department going to look at these incidents and

determine whether there is prosecutions that shou 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 efft 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 500 and the risks of course larger. so how is the admistration 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 sufficientor the risks we face. >> i agree with you on that that they are not sufficient. i will call your attention yr 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 eugh 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 fakehat would make it virtually impossible or very difficult for other independents and small operators and there are thousands that seem tbe invisible to some members but they are not invible to me. i thk 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 queion. i need to be very clear with you as we met in this my office for sometime and appreciateou 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 l requires me to notify them that their

obligation to advertise and receive claims and make sure th 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 tn 7 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 dtribution, 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,r. 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 ts 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 wherthere 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 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 cap 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 thinkhat 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 companiesoing 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 ve interested in seeing these investigations run the ground and not ematurely 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 likeo request that when he provides

the b.p. responsibility document to senator menendezhat you make it availle to the entire committee. thank you. >> let me thank ts 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. jonath 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. regaless, 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 funds supported by a per barrel tax on domestic and imported oil. 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. 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 quicklyaise the fund's balance. concurrently congress could remove or raise or put an instant cap on the trust fd. 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 at 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 finaial 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 prosed $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 blowos 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 pipenes. 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 requirent 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 nessary 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

proach 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 rket 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 committe today with its deliberations on the gulf oil spill. i'll just proceed to the constitution at of it. and try to keep the lawye 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 fshore 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 provisionsmbody 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 i 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 oft 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 rationalizeaon test.

it seems rational enough without bringingn 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 regar 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 s305 sets a date ofpril 15 for the into have civil penalty ca 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 continuingith 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 svency 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 subt 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 reliabili 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 --s a way to speed up the -- the ability of folks to get compensated f 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 iis 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] [captions copyright national cable satellite corp. 2010]

>> the house natural resources committee continues their investigation into the gulf of mexico oil spill this morning. they will have interior secretary ken salazar and a management service. that is live on c-span 3 at 10:00 a.m. eastern. in a few moments, today's had lunch and your calls live on "washington journal." and the house is back in session at 10:00 eastern with live coverage here on c-span. we will have more about the gulf of mexico oil spill from admiral than allen in 45 minutes. the head of the u.s. medical association will take your questions about the new health- care laws at 8:30 eastern and we will focus on the deficit with a business, -- with a business columnist.