Defending BP

Against one charge (and one charge alone). From today’s Washington Post:

The company’s position is that it will pay for claims directly associated with the oil in the gulf. The Obama administration, however, ratcheted up the potential scope of BP’s liability last week when Interior Secretary Ken Salazar told Congress that the administration wants BP to pay for the lost wages of oil industry workers affected by the moratorium on deep-water drilling. White House press secretary Robert Gibbs, responding to questions from reporters, affirmed Salazar’s position: “The moratorium is a result of the accident that BP caused. . . . Those are claims that BP should pay.”

On this one charge, I don’t think BP (BP) should have to pay. The moratorium was caused by the government imposing a moratorium — that was the government’s choice, not BP’s. BP is responsible for the damage BP causes, not the damage that other deep-water rigs might cause, so it should not be held liable for costs associated with preventing that hypothetical damage. Why does this matter? Consider this exchange between Salazar and Senator Landrieu of Louisiana:

The offshore drilling industry is reeling from a six-month moratorium on deepwater oil and gas exploration, and a delay in drilling in shallower depths while new safety requirements are implemented. The costs to idled rigs and workers — as well as their drilling suppliers across the Gulf Coast — could end up dwarfing the economic damage from the spill itself, said Sen. Mary Landrieu, D-La.

She pressed Salazar to explain how the government — and BP — would repair the economic damage to the energy industry if the deepwater drilling ban and the delay on shallow water operations causes “oil service companies to either go out of business or take bankruptcy and lay off thousands of workers.”

“Are you going to ask BP to pick up their salaries and make them whole?” Landrieu asked during a Senate Energy and Natural Resources Committee hearing on drilling safety.

“Yes, we will,” Salazar said. “BP is responsible (for the spill), and BP is responsible for all of the damages that flow from the oil spill. And these are some of the consequences that flow from that oil spill.”

What the government should be doing is making sure that those with the clearest and most direct claims for damages have first crack at whatever will remain of BP’s assets. Adding in these political constituencies with unjustified or at best marginal claims makes that more difficult.

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About Andrew Samwick 89 Articles

Affiliation: Dartmouth College

Andrew Samwick is a professor of economics and Director of the Nelson A. Rockefeller Center at Dartmouth College in Hanover, New Hampshire.

He is most widely known for his work on the economics of retirement, and his scholarly work has covered a range of topics, including pensions, saving, taxation, portfolio choice, and executive compensation.

In July 2003, Samwick joined the staff of the President's Council of Economic Advisers, serving for a year as its chief economist and helping to direct the work of about 20 economists in support of the three Presidential appointees on the Council.

Visit: Andrew Samwick's Page

3 Comments on Defending BP

  1. If you or I accidentally spilled a drum of oil that resulted in killing wildlife and contaminating the ground we would be thrown in jail AND be forced to pay for the cleanup.

    The BP catastrophe (More than a simple oil spill) is paramount to Global terrorism and those responsible at all levels should be held to such crimes.

  2. BP are clearly in the wrong for having neglected or overlooked the dangers of deep-water rigging. BP shareholders, including a number of prominent individuals in the UK Government are obviously annoyed with Obama's increasingly bellicose attitude towards BT for purely selfish reasons but Obama has no choice. BP's estimation of itself was always over-exaggerated. Profiteering and maximizing profits seem to have eclipsed respect for the environment, so BP should not be defended by Brits or by Americans. BP have shown us the very worst aspects of corporate greed and unacceptable insensitivity towards our natural ecology. Boris Johnson and David Cameron should be very ashamed indeed for even suggesting that Obama's actions have any nationalistic angle. What makes this scenario so bad is the way politicians use the 'nationalistic' card just because it hurts their pockets. Why did BP tie their investments to Pensions in the first place? Why were shareholders not told about the riskier side of BP's careless and flippant attitude to rigging? This may be a bad time for British shareholders in BP but that is not Obama or America''s fault.

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