Belle of Liberty

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Wednesday, June 16, 2010

Pouring Money onto Troubled Waters

There have been countless oil spills since oil drilling began. In those years, the industry has learned a lot about containment. No matter how deep the well, the water still has to come to the surface and that’s where containment happens. An unprecedented number of gallons of oil have gushed into the Gulf. But then again, it’s been an unprecedented number of days since anything was done about containing the spill on the surface.

Burning off the oil was ruled out and now there’s too much oil for the process to be of any use. Containment ships were sent back due to paperwork. This has been going on since April 20th. Today is June 16th.

“We’re going to make BP pay,” Obama bravely vowed last night. The White House is demanding that the company pay into an escrow account, controlled by government, to pay for the economic costs of the spill.

According to the Wall Street Journal:

The President suggests that BP suspend its dividend, which is crucial to the retirement of thousands of shareholders. BP may decide it is prudent to suspend its dividend while it gets a better handle on its ultimate liability. But the White House has no legal basis to compel such a decision. Meanwhile, Democrats in Congress are preparing to lift their own $75 million liability cap and apply that retroactively to BP, another move of dubious legality.
No wonder Britain's Prime Minister and other officials are alarmed about the fate of one of their country's foremost corporations. This is the kind of treatment that Americans would protest if it were applied to U.S. companies by Venezuela or Russia.
The idea is for BP to turn its assets over to a fund administered by an "independent" trustee who would decide what are legitimate damage claims from Gulf residents and businesses. Senate Democrats have graciously advised BP to start its payments to the fund at $20 billion.
The White House knows it has no legal authority to demand such a corporate ATM card, but it is counting on public anger to coerce BP to go along. The White House also knows BP is currently operating under the Oil Pollution Act, a piece of legislation passed in 1990 by a Democrat Congress.
A comprehensive response to the 1989 Exxon Valdez spill, the law was the product of 15 months of Congressional work and earned nearly unanimous bipartisan support. The bill made polluting oil companies responsible for all containment and clean-up costs. The law also established a claims process, which requires that companies compensate businesses or individuals harmed by oil spills.

BP has more than 600 claims personnel working to pay fishermen and others that have suffered economic damage. It has vowed to pay all "legitimate" claims and has worked through 20,000 of 42,000 submitted so far, at a cost of $53 million. BP has also promised it will not limit its payments to the Oil Pollution Act's $75 million cap on these damages, and last month it announced it would hire an independent mediator to review claims. Any claimant denied payment has the right to sue for redress under the law, which means BP has an incentive to get these payouts right.

By contrast, a government-administered fund more or less guarantees a more politicized payment process. The escrow administrator will be chosen by the White House, and as such would be influenced by the Administration's political goals. Those goals would include payments to those harmed by the Administration's own six-month deep water drilling ban. That reckless policy will soon put thousands of Gulf Coast residents out of work, but the White House knows that BP isn't liable under current law for those claims. The escrow account is an attempt to tap BP's funds by other means to pay the costs of Mr. Obama's own policy blunder.

Every $1 spent to pay for damages caused by the moratorium is also $1 less available for the oil-spill victims for which this money was intended. And that's before other interest groups popular with Democrats, such as the plaintiffs bar, plead their cases to the escrow fund's King Solomon.

The President managed to turn the Deepwater Disaster a commercial for his cap and trade agenda, accusing us of being “addicted” to oil. Only now has he begun to talk about repairing the breach in the well. Now that the Gulf Coast is thoroughly coated in oil is he allowing sand berms to be built and container ships to come into contain the oil. Now that he is in control of the damage control and has container legislation in place to soak up all that nice oil money from British Petroleum.

The best way to avoid a disaster of this kind is to not elect legislators who have a vested, financial interest in climate change.  We need to wean ourselves from politicians addicted to our tax money.

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