By Tennille Tracy Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Sen. Mary Landrieu (D., La.) is attempting to overcome partisan debate over oil-spill liability caps by developing a proposal that could serve as an alternative to plans floated by Republicans and Democrats as they try to put together an energy bill. Under Landrieu's proposal, an existing liability cap on economic damages resulting from an oil spill would be raised from $75 million to $250 million, according to an aide. The proposal would also set up a $10 billion mutual insurance fund that energy companies would collectively pay for. Each company would contribute different amounts, based on their oil and natural gas production, as well as bonus bids. "The senator is working with her colleagues to find a third way on the alternative cap," a spokesman for Landrieu said. As a Democrat and a senator from a Gulf Coast state, Landrieu plays a pivotal role in the debate over energy legislation. In crafting this liability scheme, Landrieu's goal is to ease the liability burden on small to medium-sized energy companies, which say that unlimited caps--which Senate Democrats have proposed--would be prohibitively expensive. If an oil spill causes economic damages worth more than $10.25 billion, Landrieu's plan shifts responsibility to the companies that are responsible for the spill. Congress began to look at liability caps after the Deepwater Horizon oil spill. Under the Oil Pollution Act, energy companies have to pay for the full value of spill-related cleanup costs, but their liability for economic or environmental damages are capped. BP PLC (BP, BP.LN) has said it will pay for all damage claims, but Democrats said they wanted to seal those promises into law and ensure energy companies would be held to the same standards in the future. Senate Majority Leader Harry Reid (D., Nev.) has said he wants to pass an energy bill before members leave for a summer break in August. But it is becoming increasingly unclear whether Reid will be able to do that, Senate aides said. If the Senate doesn't pass the bill before the recess, Landrieu wants to continue to pursue her liability plan as an alternative to existing proposals, a spokesman said. -By Tennille Tracy, Dow Jones Newswires; 202-862-6619; tennille.tracy@dowjones.com (END) Dow Jones Newswires July 28, 2010 18:05 ET (22:05 GMT)