Tuesday, June 15, 2010

Political panic making a disaster worse

I am posting today's editorial from the Wall Street Journal because I believe it is of utmost importance to understand the ultimate ramifications inherent in what the Obama Administration and the President are doing.

Does an ecological disaster which causes a political panic justify setting aside the Rule of Law?

How can BP be forced to pay more than the $75 million cap on liability set by the Oil Pollution Act of 1990 without violating the rule of ex post facto constructs?

The bigger danger here is what then will NOT justify a willy-nilly setting aside of laws and precedent?

Truly, is it the rule of "Never let a crisis go to waste", in other words ruling by Presidential fiat.

"You, BP, go put money away now, in a trust we set up and manage, never mind paying dividends." says President Obama.

Now mind you I believe BP will be ultimately found to have used practices that ultimately will be shown to be the proximate cause of this disaster.  Apparently news came out this morning that the BP engineer on site chose to use only 1/3rd the recommended amount of centralizers to align the casing in the hole prior to cementing it in, in order to save money. (click here to see article)  This could have allowed the casing to not properly set in the hole and ultimately weaken the cement job.

We shall see.  However Presidential fiat shouldn't be the rule.

Obama's Political Oil Fund
The Wall Street Journal

The BP oil spill is already a calamity for the Gulf Coast ecosystem and economy, but now that Washington is looking to deflect all political blame it could also became a disaster for the rule of law. Exhibit C, or perhaps it's now D, is the new White House demand that BP pay into an escrow account controlled by government to pay for the economic costs of the spill.






Which brings us to the escrow demand that the President will presumably elaborate on in his Oval Office speech tonight. The idea is for BP to turn its assets over to a fund administered by an "independent" trustee who would decide what are legitimate damage claims from Gulf residents and businesses. Senate Democrats have graciously advised BP to start its payments to the fund at $20 billion.

The White House knows it has no legal authority to demand such a corporate ATM card, but it is counting on public anger to coerce BP to go along. The White House also knows BP is currently operating under the Oil Pollution Act, a piece of legislation passed in 1990 by a Democratic Congress.

A comprehensive response to the 1989 Exxon Valdez spill, the law was the product of 15 months of Congressional work and earned nearly unanimous bipartisan support. The bill made polluting oil companies responsible for all containment and clean-up costs. The law also established a claims process, which requires that companies compensate businesses or individuals harmed by oil spills.






BP is financially responsible for the Deepwater Horizon gusher, and the White House should want the company to stay healthy enough to honor those obligations. Instead, the Administration's denunciations and legally dubious demands are compounding the damage.


