Senate Republicans Block Bid To Raise Oil-Spill-Damages Limit

An effort by a few Senate Democrats to raise the cap on damage claims that BP Plc (BP) must pay for a a Gulf of Mexico oil spill was blocked on Thursday after Republicans said the plan wouldn't work.

Sen. Lisa Murkowski (R, Alaska) led the charge against the measure, aimed at raising to $10 billion the limit on damage claims. The current limit, of $75 million, has been widely criticized by lawmakers as too low. Republicans blocked efforts to proceed, saying independent offshore oil developers would not be able to stay in business under the legislation because small companies wouldn't be able to self-insure against claims.

"The only companies that are going to be able to self-insure against this level of strict liability are the national oil companies, the super majors," Murkowski said. She said that would create a "monopoly" on offshore drilling among giant companies such as BP. "We need to ensure that BP as the responsible party pays."

BP has scrambled to stop oil from spilling from a well a mile below the surface since a deadly oil-rig explosion on April 20. BP officials have declined to estimate the extent of costs associated with the spill. Earlier this week, Lamar McKay, the head of BP's U.S. unit, said the company would pay all "legitimate" claims related to the spill. He said that "claims have to have some basis."

The White House came out ahead of the vote with an announcement on Wednesday with proposed legislation to allow the federal government to collect more damages from companies responsible for the spill. But the Obama administration didn't propose a specific increase in the cap on damages, and on Thursday refrained from offering support for the measure from Sen. Bill Nelson (D., Fla.), Sen. Bob Menendez (D., N.J.), and Sen. Frank Lautenberg (D., N.J.). The Democrats must now go back to the drawing board.

"I'm really disappointed some of my colleagues decided to block the legislation to hold BP accountable for this environmental disaster," Nelson said in a statement. He said that Congress "needed to raise the cap to $10 billion. And I'm not sure $10 billion is going to be enough."

-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; [e-mail]

(Jared Favole contributed to this report.)