UPDATE: US Oil-Patch Democrats Oppose House Drilling Bill

(Updates with quote from Rep. Waxman, in sixth paragraph.) By Siobhan Hughes Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Oil-state Democrats are lining up against offshore-drilling legislation up for a vote in the U.S. House of Representatives Friday, suggesting that Congress may face pressure to scale back its response to the worst offshore oil spill in U.S. history. "I'm a 'no,'" Rep. Gene Green (D., Texas) told reporters on Thursday. He said that "about 30 of us" have concerns, especially about a measure that would discard the cap on damage claims that companies would face for spills like the one in the Gulf of Mexico. Independent oil and gas producers said they would be put out of business if exposed to unlimited liability for damages. The House vote is the first chamber-wide response to the BP PLC (BP, BP.LN) spill, which harmed the tourism and fishing industries along the Gulf Coast and damaged wetlands. With control of 255 seats, the Democratic caucus has enough votes to pass the spill legislation even if 30 members break ranks. But the rift exposes a broader divide in Congress that could stall spill-response legislation in the U.S. Senate, where Democrats need Republican support to advance legislation. Eliminating the cap on damage claims that companies must pay for offshore oil spills is viewed by oil and gas producers as the most onerous part of the legislation. Democratic leaders and the Obama administration want to discard liability caps, currently set at $75 million, in order to avoid putting taxpayers on the hook for damages that go beyond the costs of cleanup. But without a limit to liability, insurers have indicated that they will stop offering insurance, leaving offshore drilling only to the major oil companies that are able to self-insure against disasters. "The current limits don't work," said House Natural Resources Committee Chairman Nick Rahall (D., W.Va.) "Are the concerns of the small independents legitimate? Yes, I believe they are. And perhaps in the give and take that's going on currently, we'll find some middle ground there that will take into account their concerns." He added, "I'm hoping that something can be found." "They're raising a good concern and I guess we have to evaluate it," said House Energy and Commerce Committee Chairman Henry Waxman (D, Calif.) But he said that "the committee that decided that issue for the House must have heard that and didn't quite accept it." In the U.S. Senate, Sen. Mary Landrieu (D., La.) is pushing a potential compromise to break an impasse. Under Landrieu's proposal, which hasn't been formally introduced, an existing liability cap on economic damages resulting from an oil spill would be raised to $250 million from $75 million, according to an aide. The proposal would also set up a $10 billion mutual insurance fund into which energy companies would collectively pay. Each company would contribute different amounts, based on its oil and natural-gas production. -By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; siobhan.hughes@dowjones.com (Tennille Tracy contributed to this article.) (END) Dow Jones Newswires July 29, 2010 18:30 ET (22:30 GMT)