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What if We Got Serious About Solving the Gulf Spew Crisis?

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According to Timothy P. Carney of The Examiner, "Current federal law limits the liability of companies responsible for an oil spill. The guilty party has to cover the cleanup, but as far compensating those harmed by the spill -- such as fishermen and property owners -- the companies are on the hook only for the first $75 million. " [1]

How much is $75 million is relation to an oil spill? Let's look at the history of the 1989 Exxon Valdez spill in Alaska. According to Nina Totenberg at NPR, "At Exxon's request, the federal court in Alaska certified about 32,000 individuals with potentially valid claims to sue as a single group. In closing arguments, their lawyer asked for between $5 billion and $20 billion in punitive damages meant to deter such conduct in the future. Exxon, in closing arguments, said there should be no punitive damages. The jury awarded $5 billion, which, after two appeals, was reduced to $2.5 billion, or roughly $75,000 per person." [2]

Thus, even if the current Gulf Spew were comparable to the Exxon Valdez disaster, $75 million would only cover about 1.5% to 3% of the liability. But the Gulf Spew has already been and will be even more damaging that the Exxon Valdez spill for at least three reasons:

1. You have to adjust for inflation. Add about 70% for inflation between 1989 and 2009.[3]
2. The Gulf Coast is considerably more populous than Prince William Sound was in 1989 so many more properties and lives will be impacted.
3. As of May 20, the Gulf Spew has discharged the equivalent of 11 Exxon Valdez spills, taking the most recent estimate of 95,000 barrels per day. [4]. It is likely that the gusher will continue for several more weeks.

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Clearly, there is no chance that the damages for the current spill/gush/spew will be less than $75 million. That means that if the $75 million cap is allowed to stand, which I believe BP is counting on, then BP has absolutely zero financial incentive to avoid further damages to people, property and businesses in the Gulf region because they've already reached the $75 million cap. According to Senator Bill Nelson (D-FL), BP CEO Tony Hayward won't commit to paying out any more than $75 million in liabilities and instead says, "we'll have to work that out". [5]

What are BP's intentions? It doesn't take a course in motivational acting to figure out that BP will do everything it can to improve its bottom line. After the full extent of the gusher's damage and the inadequacy of BP's compensation to victims becomes apparent, there will doubtless be many pundits who'll feign surprise like some twisted version of Captain Renault in "Casablanca" who was "shocked, shocked to find that gambling is going on in here!" [6] The whole raison d'etre of corporations is to internalize profits and externalize costs. So, to these pundits I would say, "Puh-leeze! Spare us the histrionics and tell us something we don't already know."

Will BP do everything it can to conceal the extent of the spill? That would seem to be a strategy that would reduce their ultimate liability and benefit their bottom line.

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Will BP try to paint the accident as someone else's fault? Yes, they've already said that the fault lies with TransOcean (Lamar McKay, BP Senate Hearings) [7].

Will BP clean up the Gulf? Presumably, only to the extent that cleaning up will cost them less than not cleaning up.

Will BP pay the costs of clean up? Again, presumably, as little as they can get away with.
Does BP have any motivation to stop the gusher? Well, yes, it's spewing 95,000 barrels of oil a day, which at $75 per barrel is about $7 million a day, $50 million a week, $2.5 billion a year. They want that oil going into their bank accounts, not into the ocean, especially if they're going to have to face huge costs for the catastrophe.

Will BP stop the gusher even if it means they'd have to destroy the well, say, with an underwater explosion? Hmmm". tough call. Drilling another well would cost tens of millions of dollars in addition hundreds of millions of dollars in delayed oil production. So" maybe not?

Will BP ever rescind their early estimate of 5,000 barrels per day leaking and admit that scientists' estimates of 70,000 to 95,000 barrels per day are closer to the truth? Not if they don't have to.

With the recent success of BP's pipe that is recovering 3,000 to 5,000 barrels a day, will BP hope that most people still keep the bogus 5,000 barrels per day leak rate in mind so they'll mistakenly assume that the problem is 100% under control even though the tiny recovery tube is more like a soda straw sucking water from the end of a fire hose? Well, so far, they've said nothing to disabuse anyone of that fallacy.
During the cold war there used to be a saying that "you can trust the Russians to be Russians". Now that some of America's major adversaries are international corporations, I'd say we should follow a new maxim; namely "you can trust corporations to be corporations".

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If the history of corporate abuse is any guide, we can trust BP to get the oil gusher under control as soon as is cost-effective without destroying the well. We can reasonably expect they'll continue to try to hide the actual immensity of the underwater oil plumes by pretending the underwater plumes don't exist (for example, the bogus 5,000 barrels per day leak rate was based purely on oil reaching the surface), by using toxic dispersants to break up oil slicks and send them back underwater and by withholding as much information as they can get away with.

That's the status quo. That's the default. If we don't like it, then someone will have to do something different.

The most obvious alternative would be for the government to take charge. But, unfortunately, there's no political upside for anyone in government to take charge of the spill. No matter what happens, the Gulf Spew is likely to be the largest environmental disaster in history, at least so far, and maybe for all time. If you look at a map of the Gulf's "loop current" [8] and you consider that at least some of the oil is drifting to the southeast [9], it isn't hard to imagine a major flow of oil drifting into the loop current and following the gulf stream up the Eastern seaboard and east across the Atlantic. No one wants to risk having their name associated with a catastrophe of that scale. As things stand, whatever happens can be blamed on BP and its subcontractors. If the government takes charge, the blame will get shifted to whoever takes charge. Even if the government succeeds in stopping the flow immediately, the perception of the catastrophe is going to inevitably increase with time as more drifting oil washes ashore and the media isn't even remotely savvy enough to report that, "yes, things have gotten worse since the government took charge, but not nearly as bad as they would have been had they not taken charge." So, taking charge and solving the crisis is inherently a thankless job that would cost anyone who undertook it a lot of political capital, perhaps even their career, even if they did an excellent job. For these reasons, it's unlikely anyone will truly step forward and own the situation.

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Marcus B is a free-lance consultant, writer, website developer and activist for election reform.

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