The United States is playing a dangerous game with the BP Oil Spill.
Unlike others, at least President Obama has refrained from referring to BP by its old name of “British Petroleum” (which it hasn’t used since its merger with Amoco 12 years ago). Nevertheless, while the rhetoric may seem like a good idea while the mid-terms are coming up, in the long run US politicians may come to regret their behaviour.
It should go without saying that BP deserve a degree of opprobrium. There are serious concerns over their safety record, and the effects of the oil spill are catastrophic. BP will incur serious liabilities for the damage inflicted. To their credit, they have so far not attempted to avoid these.
The first is that the desire to “kick some ass” is not in the interest of anyone other than a politician in search of a soundbite. Satisfying though it may be in some quarters to punish BP for their accident, this will hurt those most badly affected by the spill. An irony of compensation is that when you have been mistreated by someone, it becomes in your interest that they are as financially successful as possible. This is because they need enough money to be able to pay you compensation: if they are in financial difficulties, you risk not receiving the full amount you deserve. The courts are aware of this conundrum, and avoid imposing what is termed “crushing liability” for this reason. Inflicting further damage on BP’s balance sheet and share price is unnecessary, irresponsible and will only hurt those worst affected by the spill.
I say “further” because BP’s value is not just being affected by the negative publicity (rightly deserved) coming from the spill, but the positioning from Washington. In particular, BP’s share price is falling because of the threat of the US injuncting BP paying dividends to its shareholders. This is entirely unnecessary: BP currently has enough to meet its obligations to both its shareholders and the victims of the spill. The effect is only to damage the overall financial health of the company, which isn’t in anyone’s real interest.
More damaging to the US though are the long-term political effects. The rhetoric coming from Washington reeks of protectionism; were such measures attempted by another EU state, this would end up in court. The tit-for-tat retaliations are already beginning, and the US has far more to lose from this than the UK. While BP has agreed to halt its dividend, hurting UK pensioners, the quid pro quo has been that it will not pay the wages of those laid off by the moratorium on deep-sea drilling. The anger at that will be directed at the White House, not BP.
In particular, the US is vulnerable to being held to the same standard as BP. The extent could be very damaging indeed. American banks could be held liable for causing contagion that spread to, and severely damaged, the UK economy. US companies that have polluted the here, or tobacco companies that have caused lung cancer in the UK could even face liability. American efforts to protect Warren Anderson, the then-chairman of Union Carbide from extradition to India over the Bhopal disaster are particularly galling when compared to their treatment of Tony Hayward. A very reasonable request that American firms be held to the same standards as BP could be damaging politically and economically.
BP has caused damage, they are at fault, and they must pay out. But kicking them benefits nobody.
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Nice post – just a minor addendum. Blaming BP (and I’m talking about proper moral blame, not holding them responsible – kicking ass, not merely requiring them to foot the bill) distracts from the massive shortcomings on the government’s side that led to the disaster, in particular at the MMS (Minerals Mgmt Service), a shambolic government department if there ever was one.
In particular, it is about the mandatory guidelines for BOP actuation, which is pretty much the big issue of liability here (that, and the pumping seawater thingie). Without getting too technical: there are about three ways to actuate a blow-out preventer sitting on the bottom of the sea – one is by a hardwired link between the rig and the BOP (this is generally referred to as ‘electronic’), by a dead man’s switch (which basically is a mechanism that ‘polls’ the connection between the rig and the BOP and if it is interrupted, triggers the shutdown) or by an encoded acoustic link (generally called ‘acoustic activation’)*. The relevance to Deepwater Horizon is this: a lot of countries mandate at least electronic + acoustic backup. The UK doesn’t, and the MMS was entirely content with electronic + dead man’s, and no acoustic backup, as far as the Macondo Prospect (the oil field where Deepwater Horizon was located) was concerned – although rigs further to the coastline did require acoustic backups.
There are multiple explanations for why that was the case, but none of them really matter. Acoustic transmitters are not cheap, though not particularly costly compared to the costs of a rig (we’re talking around $500,000 regardless of size of rig &c.), however, they have the tendency to do false positives and trigger the BOP when no signal has been sent, which is a bit of a nuisance, as it shuts production down until it is cleared up.
When the Deepwater Horizon explosion happened, it is presumed that control room personnel who could have actuated the BOP manually were dead before they could push the button. Loss of control should have severed the link between the BOP and the platform and thus triggered the dead man’s switch, but it didn’t, for whatever reason. The advantage of an acoustic link is that it can be triggered from a boat, and so does not require either physical access to the BOP or to the command module of the rig. Had there been an acoustic trigger, the rescue boats could have remotely shut down the well. Whether that would have made a difference or not is a different question – the BOP itself was structurally crapped up, and there’s an entire different story about the MMS failing to require alterations after a BOP failure in 2005. But this is already too long.
The bottom line is this: the state can’t go half-ways. Something is either required, in which case it should be mandatory, or it’s not required, in which case the moral reprimand for those who don’t take those safety precautions is a bit daft. Of course, the American left was happy to hit back by pointing out that the MMS’ policies that were generally friendly towards drilling and did not require acoustic actuation in most cases were established during the Bush era. However, that was a year and a half ago. Why didn’t Obama clean up the MMS? Over the last year and a half, he was preoccupied with fixing himself a place in American history, rather than fixing what previous governments did wrong. That’s not what he was elected for (which is why I’m quite sure this will be his first and last term) – he was elected because people were annoyed with Bush screwing up things, not because everyone shared his great big vision of the shiny future. But I digress. What it all boils down to is that Obama lashing out against BP is a desperate attempt to channel rage anywhere but himself and the government he headed incompetently that let this accident happen.
It is desperate, and stupid.
Very stupid.
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* Of course, these are only the remote-actuation options – it’s almost always possible to use ROVs to mechanically trigger the BOP – which is what was tried at the Deepwater Horizon, but didn’t work all that well. Why, is a different issue.