Gulf Disaster: Criminal or Incompetence?

The official (USGS) estimate of how much oil is surging from the breached exploratory well one-mile below the surface of the Gulf of Mexico is now 12,000-19,000 barrels a day. That’s the equivalent of a million gallons every 30-48 hours. By this measure, we passed the Exxon Valdez disaster before 10 May.

On CBS Face the Nation today, Rep. Ed Markey (D-MA) said he believes that BP was “either lying” or “incompetent” when they initially insisted that there was only 1,000 barrels a day surging into the Gulf. He believes that the company was trying to protect itself from EPA fines:

[T]he fine which can be imposed upon them is dependent upon how many barrels per day is going out into the Gulf. If it’s 1,000 barrels per day, it’s a relatively low fine, but if it’s 10,000, 15,000, 20,000 barrels per day, it could wind up billions of dollars in fines…

Internal documents released last week suggest that from the get-go BP had data showing that the flow rate could be as much as 14,000 barrels a day.

In the meantime, it’s looking like this well will continue polluting the Gulf until August, which is the earliest that “relief” wells might be able to staunch the flow.

That’s a long-term strategy that requires engineers to hit a 7-inch target, the bottom of the leaking well, 3 1/2 miles below the surface of the Gulf. The first of the two wells to hit the target will send a massive dose of cement to seal the leaking well.

Why might BP’s actions be considered criminal instead of simply incompetent?

Last June, BP’s own engineers worried (in writing) that the metal casing might collapse under pressure. And in order for this design to move forward, it needed an exception because “it violated the company’s safety policies and design standards.”

Let’s parse that sentence again.

This flawed design — taking place a mile below the surface of the ocean — violated BP’s own internal safety and design standards. I emphasize the “mile deep” nature of this well because that’s one of BP’s current counter-arguments: it’s so deep (imagine hand-wringing), we can’t send people down there, we have to work with robots (so please feel sorry for us, we’re really doing all we can!).

There might be room for criminal charges against the Minerals Management Service, too. I’m surprised that there has been little rehashing of the Bush Administration MMS scandal (OIG Report) from late 2008:

In three reports delivered to Congress on Wednesday, the department’s inspector general, Earl E. Devaney, found wrongdoing by a dozen current and former employees of the Minerals Management Service, which collects about $10 billion in royalties annually and is one of the government’s largest sources of revenue other than taxes.

“A culture of ethical failure” pervades the agency, Mr. Devaney wrote in a cover memo. [...]

In one of the new reports, investigators concluded that Ms. Denett worked with two aides to steer a lucrative consulting contract to one of the aides after he retired, violating competitive procurement rules.

Two other reports focus on “a culture of substance abuse and promiscuity” in the service’s royalty-in-kind program. That part of the agency collects about $4 billion a year in oil and gas rather than cash royalties. [...]

The other high-ranking official the Justice Department has declined to prosecute is Gregory W. Smith, the former program director of the royalty-in-kind program. Mr. Smith worked in Colorado and reported to Ms. Denett. He retired in 2007. [...] The report accused Mr. Smith of improperly accepting gifts from the oil and gas industry, of engaging in sex with two subordinates and of using cocaine that he purchased from his secretary or her boyfriend several times a year between 2002 and 2005. He sometimes asked for the drugs and received them in his office during work hours, the report said.

Unfortunately, we don’t have a designated jailee — either at BP or in the Department of the Interior — and we probably don’t even have laws on the books that deem this behavior criminal.

But we should.

The corporate business structure was designed to limit financial liability but an unintended (?) consequence is the removal of individual responsibility.

Rarely is there a “buck stops here” person when corporate action — or regulatory inaction — affects the environment. Instead, there are financial penalties (fines and punitive damages) which are borne by the corporation as a whole, not by any individual. That’s the reason for incorporation.

Then there are armies of lawyers who drag out the financial penalty process, knowing that $1 billion today will be less money if it doesn’t have to be paid until several years down the road. For example, Exxon was initially hit with $5 billion in punitive damages. Almost 20 years later, the U.S. Supreme Court reduced that to $507.5 million, citing limits on punitive damages. Someone should teach the Justices about compound interest or cost-of-living increases: that $507.5 million in 2008 was equivalent to $292.29 million in 1989 (date of the spill, not the year that the penalty was assessed). And the legal cost to the taxpayer (all of those appeals cost money you, know) probably exceeded the final penalty. Yes, the $5 billion penalty was effectively reduced, by more than an order of magnitude, to less than $300 million.

Transocean has already asked to have its liability capped at $27 million.

What’s the current environmental disaster? Eleven actual lives (the workers killed in the explosion) plus billions in “clean-up” plus billions more in compensation for an ecology that will likely not survive three more months of a surging, uncapped, undersea well.

I call it criminal. What do you think?

Update: I just learned that Congress, in its infinite wisdom, capped damages at $75 million in 1990 and didn’t even bother to include a cost-of-living adjustment in the bill.

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