Changing the Rules When You Lose the Game

In the interests of full disclosure, you should know that I work for a company that has contracts with BP, and that I've been an embedded contractor at a BP office for the last 2-1/2 years.


That said, I'm not any happier about the situation in the Gulf of Mexico than anyone else is. I'm not a "drill at will" person, any more than I think that we should shut down oil production altogether. We're not ready for either one of those things. I'm praying for the families of those who died on the Deepwater Horizon, and for those who make their living on the shores and in the waters of the Gulf.

What gets my goat is what's happening in Congress right now. Currrent law (Oil Pollution Act of 1990) caps an oil company's spill liability at $75 million dollars. That's not even close to the potential cost of cleaning up the spill in the Gulf. However, that law, enacted after the Valdez spill of 1989, is the law that was in place when the Deepwater project received its permits. That was the law that was in place at the time of the well blowout two weeks ago. It is the law under which all parties involved were operating, quite content that it was sufficiently stringent.

Now this: House To Take Up Bill Increasing Oil-Spill Liability Cap To $10 Billion. That's right: Congress is upping the ante to $10 billion dollars, and honestly--that's its prerogative. We know that the more "efficient" these operations get (more oil, less infrastructure) the more catastrophic these spills have the potential to be. My issue is with this key point (emphasis mine): "Pelosi's announcement marks the beginning of an effort by Democrats to ensure that BP Plc (BP) pays for environmental damages caused by last month's oil rig explosion in the Gulf of Mexico."

Wait a second--since when is a law allowed to be retroactive? Regulations, sure--happens all the time. But the law? I'm fairly certain there's a clause against that in the Constitution (and, as it turns out, I'm not the only one who noticed that: CBS Political Hotsheet.).

The 1990 law was fine for 20 years, even after the biggest spill in recorded history to that point. That tells me that in 20 years we haven't had any issue of this size. In the past 20 years, the United States has been sufficiently comfortable with the ability of the oil companies to handle spills that it has allowed offshore drilling. In the past 20 years, the United States, by permitting the drilling and accepting the mountains of tax dollars and benefits of domestic production, accepted the risk associated with offshore drilling.

No oil company ever claimed that a spill of this size would be impossible, and anyone who claims otherwise is a fool. There's always the possibility of catastrophe--it was just improbable. Both the oil company and permitting agencies knew that the consequence of an incident like this would be catastrophic, but that the likelihood of its occurence was miniscule, and was therefore, by all parties, an acceptable risk for the potential return. Both sides assumed that risk, proof of the rarity of these incidents is that a blowout of this kind has never happened before. In the last 20 years, there has been no incident like this in U.S. waters.

Now, however, the rarity of this kind of incident is no longer relevant. Americans are not prepared to pay for it with lost production and environmental damage, so BP will, and has actually said that it will pay all legitimate claims anyway, irrespective of the $75MM cap. I thought that was pretty good. Apparently, though, it wasn't good enough for the Obama administration, who is pushing the legislation even while seeming to claim that in this case it isn't needed because "'the cap is not in place if somebody is found to be either grossly negligent... involved in willful misconduct, or in violation of federal regulations,' [according to presidential spokesman Robert] Gibbs at his daily press briefing yesterday" (CBS).

Gotten  goat number 2: That kind of statement from the White House implies that an investigation will find BP grossly negligent, involved in willful misconduct, or in violation of federal regulations, when we haven't had time to investigate anything because everyone is focussing on stopping the oil spread. The Administration has assigned guilt, when the only people with time to investigate are the media. From what I've been able to read, even in more liberal media sources, none of that's true. BP used industry-proven technology properly and made every effort to assure the quality of both its contractors and equipment--even if a faulty BOV slipped through, that's human error, not gross negligence. I haven't heard anything about misconduct, and the only violation of regulation that anyone's proposed is the lack of a site-specific spill plan, and in that case MMS permitted the project anyway because according to its interpretation of the regulation, Deepwater was covered by the GoM spill plan.

And just in case BP is found not to be negligent, has conducted itself properly, and didn't violate any federal regulation, and has already publicly committed to paying for the cleanup, the Administration and Congress will force them to pay anyway by retroactively lifting the ceiling on liability. Criminal or not, BP's going to pay, and that's pretty much the sentiment forwarded by the bill's author, Sen. Robert Mendez (Rep., NJ): "This is about making Big Oil responsible for its excesses."

Which excesses are those? Excess risk? Not so much, because the goverment is okay with risk as long as it turns out tax dollars and domestic energy, jobs and political capital. Excess arrogance? Not really, because every time a car drips on a gravel pad Congress drags an oil exec in front of a special committee for a pillory and a lecture on C-Span, and the execs keep taking it. No, Big Oil has to be responsible for its excess profits. For making money when the economy's weak. Big Oil has to be responsible for being one of the few viable industries in a country that hates itself for being so oil dependent that we can't say no to a $110 barrel, that preaches renewable energy while rejecting all attempts to actually make it happen (we'll spend $5 on a gallon of gas, but don't dare spend tax dollars upgrading the grid for wind power or the rail system to replace planes with highspeed rail).

Honestly? I'm fine with the U.S. deciding that we no longer want offshore drilling because, however rare, we cannot afford or recover from these kinds of disasters. I'm fine with the U.S. deciding that we're going to ditch fossil fuels altogether, because that might be a challenge with some merit to it. But a Congress that has spent the last year being pissed beyond reason at a financial system that hedged its bets on the mortgage market cannot then turn around and try, after a crash, to offload the risk that the country took in saying yes to offshore drilling. I'm tired of hearing a bunch of wealthy politicians berating wealthy people and companies for seeking wealth--politicians do the same thing, only they call it reelection.

We wanted oil, and we risked an ecosystem to do get it. We wanted tax dollars, and so we enabled one of the largest taxpaying industries in the country to do what it does best, and all was fine until we got caught by what is, in all likelyhood, an accident. A one-in-a-million happening. (Or, for the conspiracy theorists, an act of war by North Korea or an act of domestic terrorism by environmentalists reacting to the President's claim, a week before the spill, that the risk from production is not the rigs, but the refineries.)

Well, friends, this is the price of doing business. Congress made the rules. Now the country has to play by them. Suck it up.