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BP's sub-contracted Deepwater Horizon oil rig ² a 30-story, fifth-generation, ultra-

deepwater, dynamically-positioned, column-stabilized, floating, semi-submersible Drilling
Unit ² exploded on April 20th and sank two days later, unleashing a gushing discharge of
oil into the Gulf of Mexico that promises to upset the ecological stability of a vast region for
years.

This devastating oil spill is a great industrial disaster with widespread negative effects for
both the environment and those who live, work and play in the impacted areas. And we
mourn the loss of those who died in the explosion.

This crisis is far from over, but we can take steps now to examine the accident and our
responses to it. If we are to have any assurance that a catastrophe of this kind and degree
is not repeated, we need to have a clear-eyed and unflinching view of all of the contributing
factors involved.

¦
 
 




Oil companies like BP are protected by a $75M cap on damages put in place by an act of
Congress in the Oil Pollution Act of 1990. After the Exxon-Valdez disaster (1989) had been
cleaned up and nearly paid for by Exxon, oil companies lobbied Congress for liability limits
that would establish a maximum amount they would have to pay in the event of a disaster.
A Republican Congress and President Bill Clinton together enacted law requiring that oil
companies be limited to paying $75M for cleanups, leaving the taxpayer with any remaining
costs. In return for this legislative favor, the government could now tell the oil companies
where they could or could not drill.
BP entered into an agreement with the state of Louisiana to drill in 500 foot waters off their
coast. But the federal government superseded that agreement and told BP that it could only
drill farther out in much greater depths; where no well had ever been broken and under
conditions the government had never before monitored. And for this dangerous adventure,
BP would only need allocate $75M toward any possible mishap. In the case of an oil
company worth hundreds of billions of dollars, a $75M cap, well below the $14 billion
estimated for the cleanup, amounts to a corporate bailout. BP, by the way, presently earns
roughly $6 billion per quarter.

The liability cap is, at bottom, an instance of private enterprise -- Big Oil -- successfully
lobbying the power of government to gain undeserved market advantages. This
government-granted advantage becomes an incentive to hazard short cuts, hide secret
problems and cozy up to willing regulators for further advantage. It is a perverse incentive
based on the secure knowledge that no matter what the extent of an incident, BP would
easily survive to mark down the relatively minor financial loss as a ledger entry under ³The
Cost of Doing Business.´

Without such a forgiving cap, BP would be forced into the position of having to rigorously
assess the risks of drilling in dangerous, relatively inaccessible 5,000 foot deep waters and
possibly suffer the actual cost of a potentially uncontrollable and financially devastating spill.

The ruptured well at the bottom of the sea is so deep underwater that no one can physically
get to it because of the intense pressure and freezing cold. This inaccessibility is a factor in
the several failed attempts to stop the spill using robotic submersibles. Had BP been
allowed to drill on land or in more shallow waters currently off-limits, a similar accident
would have been manageable and remedied in short order. Environmentalists should ask
that bans on drilling in lower risk areas like ANWR and the shallow-water continental shelf
be rescinded. Today, we are drilling in high risk areas because cheaper, less risky sources
of oil have been deemed off limits.
¦
    




The federal government regulates off-shore drilling. The entity charged with setting safety
guidelines, conducting safety inspections and enforcing safety regulations is the Minerals
Management Service (MMS), an Executive Branch agency under the Department of the
Interior.

This agency is notorious for its corruption and incompetence and begging for a shakeup.
MMS had never required any of the critical backup systems -- the deadman, the autoshear,
the underwater robots -- to be tested and many of the cost-cutting measures adopted by
BP, and condemned by its critics, were approved by the agency charged with oversight.

A regulatory rule was ignored requiring oil companies to submit proof-positive that any blind
shear rams in use would actually shear pipe and seal a well 5,000 feet down. MMS went on
then to approved BP¶s Macondo Prospect permit without requiring this proof. MMS has in
fact approved hundreds of permits without requiring this proof and BP claims that no such
proof was ever requested of them. MMS commissioned a study by the Scandinavian
SINTEF Group that documented over 100 failures of blow out preventers. The group
formally recommended a redundant system saying, "All subsea B.O.P. stacks used for
deepwater drilling should be equipped with two blind shear rams." MMS did not incorporate
this recommendation into their regulatory regime.

Rounding out the scandal, MMS staff were perpetually being found in compromising
positions. Tim Dickinson reports in Rolling Stone magazine:

³When agency staffers weren't joining industry employees for coke parties or trips to
corporate ski chalets, they were having sex with oil-company officials. But it was American
taxpayers and the environment that were getting screwed. MMS managers were awarded
cash bonuses for pushing through risky offshore leases, auditors were ordered not to
investigate shady deals, and safety staffers routinely accepted gifts from the industry,
allegedly even allowing oil companies to fill in their own inspection reports in pencil before
tracing over them in pen.´

Far from being out of the loop, BP told MMS on Feb. 13th that it was trying to seal cracks in
the well about 40 miles off the Louisiana coast. MMS was also well aware of risk factors
connected to the failed blowout preventer. An investigation by The New York Times
revealed that:

"MMS repeatedly declined to act on advice from its own experts on how it could minimize
the risk of a blind shear ram failure in the blowout preventer. It also shows that the Obama
administration failed to grapple with either the well-known weaknesses of blowout
preventers or the sufficiency of the nation¶s drilling regulations even as it made plans this
spring to expand offshore oil exploration."

The government has also failed us in a number of ways since the spill. What the Executive
Branch should have done early on, but did not, was review the plans for coping with the
disaster and intervene decisively to move crusty bureaucracy in flexible and responsive
directions. Instead, we have seen classic bureaucratic stalling, obstruction and confusion.
In one case, the implementation of plans to dredge and build sand berms along the
coastline in effected states has been held up the U.S. Army Corps of Engineers, the agency
that must approve these plans, because the barriers may impede natural water flows.

In another case, the Obama administration declined a Dutch offer to aid in the clean up
partly because of the pro-union, protectionist Jones Act, which restricts foreign-built and
foreign-staffed sea craft from operating in U.S. waters. The Bush Administration waived the
Jones Act to help with relief efforts in the wake of Hurricane Katrina and Hurricane Rita. The
Obama Administration should do the same and, to date, has not. The Dutch offered to fly
their skimmer arm systems to the Gulf three days after the oil spill started. The offer was
apparently turned down because EPA regulations do not allow water with oil to be pumped
back into the ocean. But if all the oily water was retained in the tanker, the capacity of the
system would be greatly reduced because most of what is pumped into the tanker is sea
water.

It is also perplexing that only 20 America's 2,000 skimming barges are being deployed in
the Gulf on the off chance that the other barges might be needed for oil spills elsewhere.
These few vessels performing cleanup operations off Louisiana were halted for 24 hours
while the U.S. Coast Guard fulfilled its regulatory function of inspecting them for fire
extinguishers, life vests, etc.

Alabama Governor Riley complained that there is no single person in charge. Both Gold
Coast governors have developed plans with the Coast Guard's command center, but those
plans were frustrated when agencies like the Environmental Protection Agency and the U.S.
Fish and Wildlife Service asserted themselves. Says Riley, "It's like this huge committee
down there and [for] every decision that we try to implement, any one person on that
committee has absolute veto power." For example, the EPA has repeatedly changed its
mind regarding the chemical dispersants that Louisiana is allowed to use.


¦


Some of the cleanup methods being employed are actually very harmful to people, the
environment and marine life. More so than oil. Oil naturally breaks down in sea water over
time through weathering, feasting micro-organisms, and solar decomposition. Oil is a
common, natural presence in the environment, including in the Gulf of Mexico. A 2009
article in Environmental Science and Technology reported that the naturally occurring Coal
Oil Point seep field off the coast of Santa Barbara has leaked up to 200 barrels of oil into
the ocean every day for perhaps thousands of years. Yet marine organisms still prosper
there.

In response to the Gulf spill, toxic dispersants like Corexit (banned in Europe) are being
used. Dispersants don't clean, they disperse. They prevent oil from rising to the surface of
the water which limits its exposure to nature's cleansing agent: the Sun. Keeping oil below
the surface with dispersants hampers the natural process of decomposition. The warmer
the water and the greater the solar exposure, the faster oil breaks down. One gallon of a
Corexit and oil mixture is capable of rendering 383,141 gallons of water highly toxic to fish.
And BP has ordered another 805,000 gallons of these type dispersants to dump into the
Gulf.

There is, though, one proven technique that has been used to quickly stop deep water oil
leaks: a controlled nuclear detonation. This technique has quickly and permanently stopped
oil leaks in 4 out of 5 attempts by Russia in the 1960¶s and 1970¶s. The US government can
authorize such an option.


¦ 


The Executive Branch has proposed a controversial six-month moratorium on offshore

drilling against the advice of experts. The result would be that, after an international bidding
war, the best and safest rigs would be redeployed elsewhere in the world to satisfy world
demand and leave the U.S. with the oldest, least desirable and least safe rigs. This would
simply increase the probability of another major disaster. An arbitrary six-month moratorium
on new deep-water drilling would further damage the already faltering economies of the Gulf
states and could result in the loss of 20,000 oil industry jobs. The drilling industry estimates
the moratorium would cost rig workers as much as $330 million per month in wages. And
this does not take into account businesses serving those rigs, like machine-shop workers.

Making matters worse, the White House is engaged in a cynical, politically-motivated public
relations campaign that would dishonestly lay all of the blame on private enterprise to
obscure its own culpability. This indignant kabuki dance has helped to fuel a general anti-
business hostility in the nation that is inciting consumers and activists to target small
business-people who own BP gas station franchises for boycotts and vandalism. Attacking
and boycotting these small businesses has no impact on BP. The majority of BP stations
are privately-owned. Instead, these actions only hurt local business and the low-skilled
employees they hire. And much of the gasoline sold at BP gas stations comes from other
sources. No practical good can come of grandstanding and demonizing BP. No amount of
bullying, boasting, threatening, or emoting will solve a complex technical problem.

Leveraging the hostility it has fueled, the government now demands that it should take over
the claims payment process by appropriating financial assets for disbursement to injured
parties on its own terms. First of all, the government does not have a good track record of
efficiency in handing out aid to disaster victims -- or, in some cases, non-victims. And
having the government disburse claims money gives the illusion that the government is
solving the problem when it has only seized assets to distribute according to political
calculation.
The compensation process is the proper function, first, of the private sector and, second,
the judicial system. Instead, the White House is expropriating vast sums of money from a
private enterprise to distribute to whomever it deems worthy of compensation. That is
precisely what is happening with the $20 billion shakedown of BP to compensate people
allegedly harmed by the spill. This should guarantee a steady stream of claimants and
rooms full of indifferent bureaucrats and attorneys. The takeover of the claims process also
fosters the illusion that politicians are doing something, diverting attention from their own
culpability.

Further exacerbating the problem has been the two-month-long partisan media blackout of
the government's obstructions and incompetence before and after the spill. Faking reality
does not change it. And the media have once again failed to perform its watchdog function.

 



The proper role of government in a free society is limited; that is, limited to the protection of
individual rights within a framework of objective law. The government should and must
protect individuals from violence, fraud and willful negligence.

The federal government owns the property where BP and other oil companies drill for oil in
the Gulf of Mexico and has an obligation to ensure its proper and safe use. This should
include ensuring that no action take place on that property that would egregiously pollute
the common environment or endanger the lives and livelihoods of the people there. A
property owner has both rights and responsibilities in this respect and must take pains to
avoid causing harm.

All property owners should regulate; that is, control or direct by rule, principle or method the
uses to which their property is put. You may apply a rule in your own home that admits no
handguns and all guests must comply. The federal government may likewise set rules
regarding what types of activity take place on its property and parties to lease agreements
must comply. In the case of the homeowner, a simple acknowledgment may suffice. In the
case of complex and dangerous deep-sea oil exploration, rigorous standards, inspections
and enforcement actions are necessary. In both cases, transparency on the part of the
guest is required.

Any breach of established rules should be met with impartial enforcement for the benefit of
the innocent. As it is, the Interior Department, through MMS, holds the keys to access to
offshore drilling. It is through government dereliction, corruption and graft that BP receives
unfair advantages in the marketplace.




What needs to be addressed is a legal and policy framework that encourages and rewards
misconduct on the part of Big Oil.

Total liability: Government-imposed liability caps should be removed to expose oil

companies to the actual cost of damages in the event of an incident. In this way, self-
interest begets compliance. Oil companies that would like to make money instead of lose it
will take extreme measures to avoid the consequences of bankruptcy. It is the artificial
removal of risk through government intervention that introduces hazard into the equation by
falsifying reality. Capping liabilities does not eliminate real damage. It simply transfers the
real costs from the guilty to the innocent.

Insurance: Rather than relying on corrupt and incompetent government bureaucrats to

police risk, oil companies should submit to the oversight of insurance companies who stand
to lose a great deal in cases of negligence or other bad behavior. An insurer would certainly
require the oil company to put up a substantial performance bond as a safeguard against a
breach of contract. And if the oil company is held fully liable for damages, they would be
foolish not to take out policies that match their exposure.

Prosecution: The government must fulfill its proper role of protecting rights and conduct a
thorough and objective investigation into the accident to determine if and where any criminal
negligence might have occurred.

Adjudication: The courts should vigorously fulfill its role of redressing grievance by quickly
and appropriately processing injury claims based on merit. Litigation is the purview of
government. If litigation in this case becomes dragged out to the detriment of the actually
injured, then this would be yet another example of the failure of government, not the private
sector.

Non-intervention: Government needs to get out of the habit of handing out favors based on
political calculation and personal aggrandizement. It is government intervention in the
economy that creates lobbyists, corporatism and special interest groups who act rationally
in their own interest in an un-free market. Corporations and special interest groups can only
buy government favors when government is for sale.


 

We ought to acknowledge that oil has brought us a many life-enhancing, wealth-producing,

comfort-creating advancements over the past hundred years or so and it remains an
essential element in our lives. Not only does oil fuel the automobiles, freighters, jets, trucks,
and industrial machinery that power our global economy, its derivatives are found in hospital
products that ensure our health: durable, flexible plastic (oil) tubes that safely delivered
food, coming from a sealed plastic (oil) bag that securely stores it; oil tubes designed to
vacuum excess fluids; disposable foam (oil) cradles to prop up the patient¶s arms or legs if
necessary±made of oil so as to be disposable; disposable, sterile gloves are either latex or
synthetic±that is, made of oil; disposable surgical masks and head-coverings; sanitary
plastic (oil) trash-bags for medical waste. Infection in the hospital operating rooms used to
be a highly-common and deadly product of surgery due to a lack of petroleum products.

There is also mounting evidence that oil is abiotic in origin; that is, not derived from fossils.
Meaning that oil may well be a renewable resource generated from deep withing the Earth's
crust that can serve mankind's needs indefinitely without reaching any mythical or hoped-for
peak. There is no viable alternative to oil on the horizon and we should continue to find
ways to safely and cheaply extract it for our use.
And there is no use in disparaging our use of a valuable resource by characterizing it as an
³addiction.´ We are no more ³addicted´ to oil than we were ³addicted´ to wood two hundred
years ago for warmth or sailing ships. We "use" oil and its derivatives for many good things
that make life agreeable and would be hard-pressed to do without it.

I hope the spill is stopped and the Gulf waters cleaned up as soon as possible. But I also
hope that the oil already spilled can be salvaged for consumption to our benefit. If we are to
continue are present lifestyles of prosperity, convenience and health, we will need to pursue
the values of civilization and that includes continuing to explore for oil. Let's make sure we
do it properly and avoid the many mistakes that went into causing our current crisis in the
Gulf.

While BP is ultimately responsible for the spill ± and for cleaning it up ± the federal
government is implicated in many significant ways as well. A lot of people have been calling
for BP to be held to account, and they should be. But a fuller accounting will be one that
includes all of the perpetrators and their degree of culpability. In that case, for all of its
failures, the federal government must be placed in the docket as well.

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