**BP turns $30 million bet into $37 Billion Liability

In Benicia Herald 6/22/10 by H. Rifkin

BP is just a large “Canary in the Mine” that is telling us that our corporate oversight and old energy policies are close to death. My mission in this article is to high light the cause and effect of a system that is governed by a small group of wealthy and powerful interests that only have their own interests at play.
It is the nature and objective of a corporation to maximize its profits for the benefit of its stockholders and participating top level management. Why do some of us have this naïve Pollyanna perception that a corporation should genuinely have the welfare of the general population and the environment as its highest priority. I liken a predatory corporate structure to a venomous snake or ferocious animal. Most of us respect poisonous snakes, but we also know that they have to be contained and controlled. Corporations provide a positive result, but need to be regulated and contained so that they do minimal harm while producing positive results.
For those who have not researched the present BP oil spill disaster I would like to shed some light as to what I have learned to date. Latest estimates are that 45,000 barrels per day of oil are leaking into the Gulf of Mexico. The last administration, because of its loyalty to the oil industry, made a concerted effort to deregulate, weaken and not proactively institute measures that would restrict the ability of the fossil fuel energy companies to operate responsibly. Being loyal to ones supporters is a normal course of events in politics and should not be a shock or surprise to anyone. BP’s plan for the drilling of the present well in question was to have it completed in two weeks. Unfortunately the drilling was moving into the sixth week at $1 million per day. So now BP has a well that is approximately $30 million over budget, and is not yet completed. On many wells a “Blowout Preventer” device is installed to mitigate any possible catastrophes resulting from the very high oil and gas pressures that are contained in an oil pocket. A survivor of the initial rig explosion, who was the chief Information Technician on board the rig, reported that Halliburton and Transocean told the BP project manager that is was a very bad idea to over ride, and accelerate the drilling rate and safety devices. After numerous warnings BP moved the project ahead which caused the destruction of the rubber gasket around the drill stem in the Blow out Preventer. In addition, BP directed its sub-contractors to take short cuts with the “Mud and Cementing” process which is used on many well casings. So folks this was not an accident or act of nature, it was gross premeditated negligence on BP’s part.
On June 2, Credit Suisse estimated BP would end up paying about $37 billion in total costs for the spill, including $15.6 billion in clean-up costs and $14.4 billion of liability claims. This would absorb three years of BP’s free cash flow after dividend payments and annual capital expenses of $21.5 billion (at an average price of $80 oil), according to in-house analysts.
Ronald Reagan said that, “Government is the problem not the solution”. Reagan’s statement was taken and executed as absolute, which is a very unrealistic view of government’s role. In the meat packing houses the government has placed inspectors to oversee the quality and hygiene of the meat packing industry. Cities have building inspectors to make sure that structures are built safely in accordance with building codes. Governments have police on the highways and streets to make sure that unsafe drivers are kept to a minimum. Government can serve an important role to protect the health and safety of its citizens, and to be stewards of the environment. Unfortunately in some instances government oversight can be inefficient, draconian, redundant, and subject to corruption. Given the alternative of no regulation or policing, the alternative of no regulation can be devastating.
In the case of oil drilling rigs, specifically deep water ones, we should have full time onsite government inspectors to monitor corporations such as BP, who put profit over safety and the environmental responsibility. In BP’s case, this specific drilling disaster would have probably been averted if there was an onsite government inspector. The government also needs to create a financial penalty structure, pay for those companies that consciously create a perilous or harmful events, that is commensurate with the financial ability of the entity to pay. Fines that do not hurt a company’s bottom line have a minimal effect on eliminating harmful future behavior. Unfortunately the entire oil drilling industry will be maligned due to one very “Bad Actor” such as BP .
The BP disaster could be a gift, if it causes us to accelerate our research and development of renewable energy sources. In addition, reducing the use of fossil fuels will reduce global warming effects, acid rain, air pollution, and carbon emissions. I believe that reducing fossil fuel use will also make us take a more serious look at our relationship to the environment, and how flaws in our technology and our corporate morality may act to hasten environmental destruction. Do we want to trust our nation’s health and safety to just “No Regulation” of corporate entities?