The British Petroleum Corporation has, through risk management failure, just created what will become the worst environmental disaster in American history. Something must be done to prevent this from happening ever again.
If we don’t want to specify regulation to mitigate corporate-generated risk, then we must at least utilize the simple and basic principle of risk transfer: industry needs to hold the United States harmless for the true cost of its risky operations within our borders.
There has been an ongoing debate over the past 25 years since Exxon Valdez whether it is adequate to have the oil industry itself police its risk. The Oil Pollution Act of 1990 and Natural Resource Damage Assessment process in CERCLA were designed to both respond to the outrage of the Exxon Valdez and were alleged to make the polluters actually liable for the cost of the damages they wreak.
Will it work?
Clearly, the oil industry will not adequately manage its risks unless we stop shielding them from the true risks of their actions to the life of their companies.
BP should have installed functional blowout protection devices that would automatically arrest the flow of oil out of the well at the ocean floor in the event of disaster at the surface. There will be deep divisions over whether the right devices were installed or whether whatever was there did, or didn’t work. The point is not arguing over that because the outcome is more important. Did BP consider non-functional blowout protection devices worth the risk to their entire company?
Obviously, BP did not consider safety device failure at one of its hundreds of oil production operations a company ending risk. BP’s own 2009 environmental impact report for this production site insisted that a major oil spill from their project was unlikely. Its leadership still, most damningly, insists that the disaster was “unforeseeable.” This is pure crap.
If BP had managed the risk of device failure as if it was a hundred-billion-dollar decision, perhaps functional devices would be in place today. But in either case, the oil is spewing unchecked into the gulf and the responsible party must pay because, in theory, OPA 90 and NRDA don’t allow for mulligans.
However, if BP and its cohorts in this environmental crime do not pay for the full and true cost, one can argue that we are shielding them from the actual risk of their actions by allowing them to externalize the true cost of a global level disaster. This means the taxpayers of this country will be heavily subsidizing BP and cohorts for their incompetence now and far into the future.
What are the true costs of this kind of global level disaster? Without forgetting that this is yet another case of multiple BP employee deaths, right now we are on the very front end of what will surely become the worst, most devastating environmental disaster in American history.
It is clear at this very early stage in the disaster that the amount of oil gushing out of the sea floor is probably greater than lowball estimates claim, and it is equally clear that because of the depth of the leak location nothing can be done to stem the underwater oil gusher for a long time, perhaps months. It is probable that the devastation will be continental, eventually stretching from Texas to Florida, and because of the Gulf Stream current perhaps even international, with oil crossing the Atlantic to potentially foul the shores of England or Iceland.
The location for this gusher could not be worse environmentally and commercially. It will end commercial fishing, oystering and shrimping in the most commercially important region in the U.S. for these activities and devalue the brand of Gulf seafood for a long time. The oil will biologically devastate immeasurable and uncleanable shorelines and bayou involving the most sensitive and important areas of North America for the life cycles of thousands of species of marine mammals, fish, and both local and migrating birds for years to come. This loss is going to be priceless and beyond the reach of any amount of money the world can generate, let alone BP. But one thing we can be sure of. If we use the Exxon Valdez model, BP will pay pennies on the dollar for direct losses.
The risks of even greater devastation are huge. The oil spill could continue into the imminent hurricane season. Besides the direct issue of interfering with frantic improvised oil capping efforts, a gulf hurricane would blow the oil and its toxins deep onto land and well within the reach of drinking water systems anywhere along the gulf coast. This is a vastly more dangerous scenario than just considering the coastal devastation that alone is epic.
BP claims it will pay “legitimate costs,” which is corporate speak for “here come the lawyers to shield the company from paying anything.”
Beyond the direct costs to the health of the environment, wildlife and people throughout the gulf coast, are the indirect costs that will be borne by both the individuals, cities, states and federal government. These indirect costs will be heavy. There will surely be protracted controversy over public health effects of potential chronic exposure through air, skin and ingestion routes of crude oil’s well known toxins including carcinogenic benzene. This could only add costs to the public health system.
Mostly we can also look at the losses to fishing, tourism and related commercial interests throughout the gulf coast. There are going to be massive government payouts to assist the devastated commercial interests. Ignoring for a moment the recent political theatrics in the Gulf Coast states over taxation and fear of “socialism,” all those who are harmed are going to want and likely get some form of government sponsored assistance caused by the failure of one London-based private enterprise.
Those who are concerned about federal deficits are going to have to swallow big time public sector payments to handle this one. Consider the effort proclaimed by President Obama, that “we” will do anything it takes to mitigate the disaster. This disaster is going to incur massive long term expenses for time and materials used by several federal agencies such as the Coast Guard, Navy, EPA, OSHA, Minerals Management Service, FEMA, National Guard and on and on, to assist BP in mitigating the impossible to mitigate. We could also see losses to billion-dollar government-sponsored habitat restoration projects started after hurricane Katrina.
Will BP reimburse the taxpayers for all these direct and indirect losses and when will it start paying? Will BP truly hold the U.S. harmless for the full and complete costs of the global scale devastation it has caused by simple failure to manage spill prevention risk? If it ends up, as with Exxon, that BP pays only pennies on the dollar for the full costs of its disaster, what are we going to do about it? Are the people of this country are going to be outraged and insist on the responsible party paying?
Irrespective of whether you favor heavy regulation of risky industries with strong specification standards or letting them do it themselves, how can anyone favor continued externalizing the true costs of their actions? If we do not absolutely create an ironclad liability that corporations must fully and completely hold the U.S. fully harmless for the risks they create while they are making vast profits within our borders, we are subsidizing corporate failure and subsidizing corporate sponsored devastation.
Does BP, the massive profit-glutted behemoth have enough money to pay for its stunning failure? BP apparently thinks it does because it is self-insured for this disaster. Without our tacit agreement to subsidize corporate failure, no management in their right minds would commit to these suicidal levels of corporate risk. Perhaps because here in the U.S., corporations such as BP or Massey mining or Lehman Brothers exist in a cocoon of taxpayer-sponsored externalization of risk, they don’t really feel the need to protect both themselves and us from their cavalier failure to manage risk that devastates far beyond the reaches of the corporate headquarters.
The Supreme Court thinks corporations are people in regard to paying for political speech. They also recently sided with Exxon by reducing the company’s financial damages for devastating Alaska to a fraction of the true cost. This doesn’t bode well for the United States standing up and demanding that BP must fully and completely compensate the people and the government for their callous disregard of risk management. If a real person was now being held in custody for the crime of blowing up the oil platform and causing 11 employee deaths and this global scale environmental destruction, he would be called a terrorist. What would the penalty be?
Over the past ten years BP has clearly demonstrated they are serial occupational killers, and serial environmental destroyers. We cannot execute BP for this massive crime against our planet, our country and our people, but we should certainly not subsidize the company either. When you watch the news reports over the next few months play out with all the frantic and ultimately useless efforts to corral and sop up oil, think of how much this is costing the taxpayers of this country. We should make BP and any other corporation like them use the vast profits they are extracting from us and pay us back in full.