Accessories to the Crime

Yesterday, Attorney General Eric Holder announced that federal authorities have opened criminal investigations into the BP Deepwater Horizon oil spill.

Such an investigation is apparently warranted. BP’s own internal documents show that they were aware of potential trouble. According to the New York Times, as far back as 11 months ago, BP “was concerned about the well casing and the blowout preventer.” But the investigation should not stop there. Let’s examine the role of the federal government in this ongoing catastrophe.

As we have covered in a previous post in 1986, Congress passed and President Reagan signed the Oil Spill Liability Trust Fund. Under the law, operators of an offshore rig face no more than $75 million in liability for damages caused by an accident.

Without that law there would almost certainly have been no accident. Why? Simply, the Deepwater Horizon well would not have been built. Would you buy stock in, or bonds from, a company that faced potential damages running into billions of dollars if the company was unable to obtain insurance? Of course not.  Thus, without a limit on its liability, BP could not have raised the capital to drill this well.

Steve Chapman writing at Reason.com observes:

BP was drilling for oil at depths that only recently were impossible. The company had solved the puzzle of how to carry out extraction a mile underwater. Unfortunately, it neglected to devise a reliable way to cap an unplanned blowout at that depth. It’s as though the Apollo engineers landed men on the moon without being entirely sure how it would get them back.

The questions is, why would a company behave so recklessly? Critics of capitalism would answer, “Greed.” But the free market places many checks and balances that prevent greedy attitudes from resulting in greedy behavior. Among those checks and balances is competition. That is why corporations turn to government to remove free market checks and balances. Government is the source of monopoly, government is the source of subsidies, and only government can grant special privileges such as liability limits on risky behavior. Liability is one way of ensuring that greedy people do not take excessive risks. Limits on liability allowed BP, with the government’s blessing, to use force against the public and the ecosystem in the Gulf of Mexico.

Use of force? BP has destroyed physical property—beaches, marshes, wetlands—and they have already destroyed the livelihood of tens of thousands of people, with more certain to come. The catastrophic effect on the Gulf of Mexico ecosystem is almost certain to be incalculable.  This is aggression aided and sanctioned by the federal government.

But there is still more. With the blessing of the Environmental Protection Agency, BP has poured almost a million gallons of chemical dispersants into the Gulf of Mexico. According to the New York Times, “BP continues to stockpile and deploy oil-dispersing chemicals manufactured by a company with which it shares close ties, even though other US EPA-approved alternatives have been shown to be far less toxic and, in some cases, nearly twice as effective.”

While the dispersants have probably reduced the amount of oil that has washed up on beaches, they may have increased the long-term environmental damage. Reports are that the dispersants have helped to sink the oil to the ocean floor damaging plankton. The sunk oil may be helping to create underwater plumes of oil that are resulting in still yet to revealed damages to the marine population in the Gulf of Mexico.

Why would the federal government sanction this? They share a similar interest to BP: to reduce as much as possible the visible damage in order to prevent the public outcry from growing still louder. A destroyed beach is visible and will have a vocal constituency. While, for example, if the breeding grounds of the Bluefin tuna are destroyed, the crime will be a largely invisible and unreported. Bluefin tuna migrate thousands of miles each year to the Gulf of Mexico to breed. Will Canadian Bluefin fishermen ever be compensated or even be recognized as have being a victim of BP’s crimes?

“Every fish and invertebrate contacting the oil is probably dying. I have no doubt about that,” said Prosanta Chakrabarty, a Louisiana State University fish biologist. Oil dispersants are maximizing that damage by increasing the number and kind of marine life that comes in contact with the oil.

The ripples to the food chain have scarcely begun. The damages to our beaches are just beginning. Unimaginable consequences will play out for many years. BP is an aggressor aided and abetted by the federal government.

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