oil company oil spill safety exemptions regulators

Congressmen Raised Concerns About BP Safety Before Gulf Oil Spill
lobby liabilities tax breaks

After Spill, More Gulf Drilling Plans Got Environmental Exemptions

On April 20 on a British Petroleum rig about 50 miles offshore, an explosion eventually sank the rig and triggered a gush of as much as 5,000 barrels of crude a day from a pipe 5,000 feet down. Cobbled below are the politics and economics from behind the scenes -- and how to change the scenery. We trim, blend, and append five 2010 articles from: (1) ProPublica, May 4, on warnings by Abrahm Lustgarten; (2) ProPublica, May 4, on penalties by Marian Wang; (3) Christian Science Monitor, May 6, on lobbying by Patrik Jonsson; (4) Christian Science Monitor, May 6, by Husna Haq, guest blogger quoting Diane Lim Rogers, Chief Economist of the rightwing Concord Coalition; and (5) ProPublica, May 11, on fresh exemptions by Marian Wang.

by A. Lustgarten, by M. Wang, by P. Jonsson, and by H. Haq

In the months before BP's Deepwater Horizon rig sank in a ball of fire in the Gulf of Mexico, the company had four close calls when its pipelines and facilities in Alaska either ruptured or clogged.

Congressmen Henry Waxman, D-Calif., and Bart Stupak, D-Mich., have been investigating BP's safety and operations since 2006, when a 4,800-barrel oil spill temporarily shut down the Prudhoe Bay drilling field pipeline.

The congressmen wrote that the company's efforts to cut costs could imperil safety at BP facilities. BP announced strong profits on April 27. The company benefited from having cut some 5,000 jobs and saving $4 billion in operating expenses.

Doug Suttles, a BP chief, described a shut-off valve as "failsafe" that failed to close. Also the company had not installed a remote control backup valve that might have stopped the spill.

BP has a recent history of disasters stemming from incomplete maintenance and faulty equipment, including the 2005 blast at a refinery in Texas City, Texas, where 15 workers died after a fuel tower was powered up without following protocol. Then there was the 2006 Alaskan pipeline spill. The company pleaded guilty to felony counts in the first incident and a misdemeanor charge in the second, tallying fines in excess of $62 million.

From 2001 to 2007, offshore drilling accidents resulted in 41 deaths and 302 injuries. Over the past 12 years, the Minerals Management Service has collected $20 million in penalties. MMS fines against BP have been the equivalent of a rounding error. Those lunch money amounts aren’t unlikely to sting much, compared to oil rents. In 2010 Q1 alone, BP grossed $5.6 billion.

Why didn't the US Minerals Management Service require that Big Oil install secondary blowout preventers on oil rigs to prevent the kind of blowout that led to the Deepwater Horizon rig explosion? Other countries have.

Ten years ago the MMS raised the alarm about the potential for catastrophic spills. But last year the Interior Department exempted BP from a detailed environmental analysis of its Gulf of Mexico operations, even as BP in early April stepped up efforts to lobby for more such "categorical exemptions" from federal law.

The current MMS is the same whose employees engaged in illegal moonlighting, drug use, and sex with oil company representatives.

Regulators rely on industry risk assessment for the new drilling depths that are now at the vanguard of exploration.

Last week, the White House canceled an event where BP was scheduled to be given a government safety award. President Obama was the top recipient of BP campaign contributions over the past 20 years.

After the Deepwater Horizon oilrig exploded, the Minerals Management Service exempted 27 additional offshore drilling projects in the Gulf of Mexico from performing an in-depth environmental analysis, saying a spill is unlikely. One of those exemptions went to BP.

The Department of Interior has put a temporary moratorium on new permits to drill offshore. MMS officials “could not say” whether the exemptions would stand when the moratorium is lifted.

Analysts estimate cleanup will cost up to $14 billion -- about how much BP's profits were last year.

BP’s liabilities may be capped by a federal rule that limits the payouts for economic damages stemming from an oil spill to $75 million. Once that threshold is reached, a federal fund kicks in, covering an additional $1 billion. The federal fund is paid for by a 8-cents-a-barrel tax on oil produced or imported into the United States.

Congress persons have introduced bills raising the liability cap from $75 million to $10 billion. There’s precedent for making the law retroactive: The Superfund forced polluters to reimburse the government for toxic cleanup.

Raising the cap will raise the cost of buying insurance for all companies producing offshore oil, who will try to raise what they charge for gas at the pump.

Usually, the US subsidizes the oil and gas industry via tax preferences, depriving the Treasury and rewarding inefficiency. May the BP disaster motivate policymakers to tax fossil fuel. When the extra costs of fossil fuel are incorporated into its price, oil companies will extract more safely, and consumers will buy less gasoline.

JJS: We should expect more such disasters as long as we limit industry liability and let them have the free lunch of natural values. Even the oil royalties that companies illegally withhold, they don’t get punished for. Yes, we should let them profit from extraction, refining, and delivery, but not from the worth of oil in the ground. And make them pay for damage to people and planet. Institute those two changes -- the core of geonomics -- and you shift all the incentives from waste and carelessness to stewardship. And that green path takes us right to alternative energy sources.


Editor Jeffery J. Smith runs the Forum on Geonomics.

Also see:

US and Alaska Fail to Collect $92 Million Damage Claim Filed ...

16 Cattle Drop Dead Near Mysterious Fluid at Gas Drilling Site

Maine Town Stands Up to Corporations

Email this articleSign up for free Progress Report updates via email

What are your views? Share your opinions with The Progress Report:

Your name

Your email address

Your nation (or your state, if you're in the USA)

Check this box if you'd like to receive occasional Economic Justice announcements via email. No more than one every three weeks on average.

Page One Page Two Archive
Discussion Room Letters What's Geoism?

Henry Search Engine