Serious Thoughts on the Oil Spill

“If anything I have said this morning has been misconstrued to the opposite effect, I want to apologize for that misconstrued misconstruction.”

I sure don’t want to ever have to go up against Joe Barton in game of scrabble. Holy cow, can he sling the 50 cent words around. ,

So Joe had a “Ready-Fire-Aim” moment in a Congressional hearing. But before I grab my pitchfork and torch and start referring to my English Muffins as Freedom Muffins, lets examine the situation shall we.

The goal of the administration should not be to put BP out of business, that serves nobody. BP out of business leaves the US taxpayer to pick up the tab. I think you do want to make sure they are held accountable for the damages they’ve caused, in the Exxon Valdez situation, a big chunk of the punitive damages were set aside in later rulings due to the event being “an accident”. Allowing a tuned up captain at the helm of a massive tanker hardly seems accidental. In BP’s case punitive actions seem appropriate as more information come to light regarding negligence in their operations which not only caused the accident to begin with, but certainly exacerbated containment efforts early on. I hope this was the reason that Government had BP put $20.0 Billion in trust. What I don’t like about the $20.0B figure is the arbitrary nature of it.. we’ve not yet adequately assessed the true costs of this event. BP had begun to pay out damages before the $20.0B.. this action simply allows the administration to “show” or “ass kick” something with out substantive evidence that this will help or get to the right people.

Congress and the President could do better than to mirror the angry mob mentality out there and kick in the xenophobic attacks on Britain for goodness sake. Replaying the fumbled goal in the USA/England football game.. totally legit, going on the air and referring to the company as “British Petroleum” a name they’ve not used in decades just to get some sort of mileage with voters out of the deal? All that does incite vandalism at local BP stations and English Pubs, it does nothing to help this situation. BTW, if you really want get people up in arms why not go back to their original name, British-Iranian Petroleum. None of this rhetoric helps. What will help?

I’m not going to begin to apologize for BP, I think their actions early on were reprehensible; they were working on containing the spill while trying to minimize impact to their bottom line and maintain the viability of the well. They should have started the secondary drilling to cut off this well the 10 minutes after the fire on the platform was put out. They certainly have been spinning a tale about how much oil is in the gulf and playing a PR campaign with dispersement chemicals to try to avoid scenes of oily beaches. Tarballs don’t look quite as bad as pelicans drowning in black goo.

In contrast to Exxon however, BP has basically done everything the government has asked of them including forking over $20B into ambiguous trust fund for who knows what.

Alright Old Man- What should happen?

Nothing fixes this quickly. Nothing. This is a disaster that will have ramifications for the Gulf States and the people who make their livings in there for a couple generations. However, here’s what I would do-

1)     Put BP’s recovery efforts under the command of United States Coast Guard and NOAA. This requires a multi-agency response, cross company response. Have BP coordinate this invites shortcuts in response that we can’t afford. Providing the Coast Guard with the resources available to BP, local agencies and enforcement would allow a clearing house for first responders and would enable better prioritization of cleanup efforts, across jurisdictions.

2)     Engage the resources of all the companies currently drilling in the Gulf of Mexico. While they didn’t cause this, “there by the grace”. All of the energy companies involved in this have an interest in seeing that this is cleaned up and cleaned up well. Public opinion will go a lot farther if we see cooperation in the recovery, it’s a small price to pay.

3)     Engage FEMA- they were savaged after Katrina, but here’s one thing they do well, they are able to asses losses and coordinate payments. I would suggest we bring in FEMA to handle claims, and BP pays the bill.

4)     A 6 moratorium on deepwater drilling seems random. I would like to see some detail on the cause of this thing. Clearly the companies spent a lot of time and effort figuring out how to get at the sea floor a mile under the surface. Just as clear, they didn’t spend too much time thinking about what to in case of a problem. I would like to see the companies come up with a contingency plans an fund a spill response organization before we allow them to start drilling again. I would think with their engineering expertise this wouldn’t take more than a few months.

As far as punitive damages, I would award damages to the families of the 11 men who were killed in the initial fire, after that we should limit the awards to real compensatory damages.. that could mean 10 years of awards mind you, especially for the fishermen. However, for all the hype around fishing, it’s less than 1% of the total economic activity in the Gulf. The biggest nugget of economic activity, according to Jim Cato at the University of Florida is $124B, oil and gas.

Fishermen? The value of the Gulf seafood industry is about $800.0M a year of which a percentage is affected. From the Mexican border to Louisiana there shouldn’t be an impact. Lets call it $600M in damages a year. The  . The value of coastal tourism, according to a 1977 Texas A&M study around $100B, lets estimate that 1/2 of that goes away due to cancellations, this one will be difficult to quantify but $50B is a chunk.

Getting to the bottom of this isn’t going to be easy, but looking for an easy scapegoat to place blame, not helping. We need a thought out approach to solving this mess and an equally thought out plan to deal with this next one before it comes to this.

And a comprehensive national energy strategy wouldn’t hurt either.