Defending BP

Mon, 14 Jun 2010 13:50:41 +0000

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 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?<!--break--> 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.