The Rights of BP?

I’m still upset with British Petroleum. They have global operations in oil discovery, recovery, refining and distribution. They have operating agreements and contracts with many nations to accomplish their work. They are a major provider in the supply chain of energy products, mostly oil and its many by products, as well as natural gas.

I’m sure they are a reliable partner in their operations. But there are questions to be asked and answered.

In 2010 BP’s oil rig, Deepwater Horizon, exploded in the Gulf of Mexico. The rig sank 5000 feet to the ocean floor. Eleven crew were killed. In a space of 87 days an estimated 3.2 million barrels of crude oil had spewed into the Gulf. The site of this disaster is 42 miles off the coast of Louisiana. Believed to be the worst oil spill in the history of the US, coastal damage extended from Florida to Texas befouling beaches and any business operations (retail or commercial) relying on those beaches. Worse still was the ecological disaster wreaked on fish and fowl life in the region as well as the delicate sand/soil and flora Eco systems that protect marine life and land masses along the Gulf coast.

In response to the disaster our federal government asked BP to fund a $20 billion recovery fund for businesses and communities damaged by the oil spill. Five years later the fund has yet to be fully disbursed to claimants. BP also pledged $10 billion to reclaim the oil and restore Eco systems as best they could. Whether all of those funds have been fully deployed on their mission is not known to me. However, it is known that much of the ecological chaos from the spill remains to be cleaned up.

Now comes the news that BP is appealing some damage claims of its Gulf oil spill.

I beg your pardon? What about the havoc Gulf coast communities and businesses endured and still have unpaid claims? What about the enormous ecological damage sustained in the region which continues to ask for help with the problems?

The risk of deep water oil drilling is huge. Yes the rewards are also huge, and those rewards are felt by society as well as the owners of the oil corporations that take on the financial risk of exploration, discovery and recovery. But so are the risks felt by everyone. The price of oil and its by products are not fully reflective of that risk.

The Deepwater Horizon was thought to be a high quality, high tech rig. It turned out otherwise. BP and its contractors were proven to have taken shortcuts that increased the risk of failure. The shortcuts were to reduce costs. Instead they increased costs exponentially. Risk assumed; loss realized.

The issue here, however, is the whole cost to the American society for the loss incurred by the corporation. So far their cost is $30 billion. The entire cost, however, is likely to exceed $50 billion. Who makes up the difference?

And yet BP is appealing damage awards to claimants. That is truly a paradigm of chutzpah! The nerve of this company to be claiming it is a hurt party! The nerve!

Energy is a vital topic to the well being of the global community. Energy supplies must be plentiful and reliable. They also must be ecologically viable, both in extracting the supplies, and the use of the supplies. Is the planet better off with this form of energy?

That is a large question that must be asked, and the answers developing over the past 100 years increasingly point to a large negative. Oil-based energy is a net liability to the global community. It is time to find replacement forms of energy. Physics and other scientific disciplines are tracking energy sources for the future. How soon will they be ready to supplant the role of oil? Perhaps it is too early to say, but it is also true to report that oil interests are slowing the acquisition of those new forms of energy. They have much to lose if oil is replaced by another dominant energy form.

Maybe it is time to turn this critical task over to academic consortia? Let them research, discover and propose the best solution for the long term? This may damage asset values for oil companies, but who knows what they would gain if they were part of the solution rather than the obstructionist?

The energy free market is encumbered by too many risk-limiting subsidies. It is not a free market in reality. We the people are actually taking on the risk, not the oil producers. It is time that governments protect their publics against this unconscionable risk.

Researchers to the rescue, please! Let the free market of ideas and discovery rule in this matter. With proper government protections we may actually find a solution to the big energy questions. The trick is to ask the big questions and honestly look for the best answers.

May 15, 2015