• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Trust Fund Ignores Rule of Law

    Why does President Obama keep saying that his administration will do everything it takes to make BP “pay for the damage the company has caused” in the Gulf? Is there some question in his mind about BP’s liability? Is this another case where neither the president nor his advisers have read the applicable law? Or is it just politics driving the White House to make the American people think the administration is doing something about this crisis?

    In truth, there is no question about BP’s liability: the Oil Pollution Act of 1990 (OPA) sets out exactly what BP and anyone else who caused the spill have to pay for. Under 33 U.S.C. § 2702, BP is responsible for all removal costs; all injuries to real or personal property; damages for loss of subsistence use of natural resources; loss of profits or impairment of earning capacity due to injury, destruction, or loss of natural resources or real or personal property; and damages for the cost of providing increased public services by any state. These categories of damages would cover all of the costs that everyone has been talking about, including the losses of the many fishermen in Louisiana and Mississippi who make their living from the sea. It would not, of course, cover the wages of oil workers who are now stranded because of the President’s decision to suspend all oil drilling for six months. But then, why should BP be liable for that? Obama’s moratorium is an unreasonable decision that is supported neither by the states in the Gulf nor experts in the oil and gas industry.

    It is true that the OPA has a cap on liability of “all removal costs plus $75 million,” but that cap does not apply if the spill was the result of “gross negligence or willful misconduct” or a “violation of an applicable Federal safety, construction or operation regulation.” So if the evidence really shows that BP was grossly negligent or violated federal regulations, there will be no limit to BP’s liability.

    What is also particularly odd, and frankly, unseemly, is the announcement by BP, after its meeting at the White House and extraordinary, extra-legal pressure from the Obama administration, that it is going to set up a $20 billion trust fund that will be administered by Kenneth Feinberg, a lawyer overseeing caps on executive pay for recipients of TARP funds. What is unseemly about this is the type of pressure involved and to what end. The president basically ignores the relevant federal statute by pressuring and threatening BP not just for more money prior to any judicial or other fair trial, but apparently for government (and therefore political) control over that money.

    And that pressure was put on BP at the same time that the president, through his attorney general, is threatening BP executives, BP engineers, and everyone else at BP involved in this disaster with possible criminal prosecution despite the fact that there is little or no evidence of any intent to commit a crime, as opposed to negligence or bad engineering (which is not yet a crime, but give this administration time). This kind of behavior brings us perilously close to the way things are done in corrupt third world countries, a point that Ben Stein explains very well over at The American Spectator.

    Finally, if President Obama were acting as a lawyer instead of the chief executive, he would potentially be considered in violation of professional conduct and legal ethics rules because most states prohibit an attorney from threatening criminal prosecution to “obtain an advantage in a civil matter.” Does anyone seriously believe that the looming threat of criminal prosecution by the Department of Justice was not a major factor in BP’s decision to hand this money over to the administration even though it is not required to do so under the applicable federal statute, a statute the President is ignoring?

    It is not the President’s job under our Constitution to make (or circumvent) the law, it is to carry out the laws passed by Congress. Once again, President Obama does not seem to understand or respect the limits on his power that our Founders built into the Constitution, a fact that becomes more and more worrisome as time goes by.

    Posted in Legal [slideshow_deploy]

    13 Responses to Trust Fund Ignores Rule of Law

    1. Joseph P. Amato, Bro says:

      Since the federal government can now extort money from a private company (BP) to supposedly offset the losses that will be absorbed by privately owned businesses in the Gulf Oil crisis; can I now ask the same administration to extract money from Bank of America, Citibank, Goldman Sacks, etc to pay business losses for legitimate claims from privately owned businesses due to the ongoing banking crisis?

      I have been a consultant to business owners and the commercial banking industry for 18 years. I represent hundreds of businesses that have either lost a large percentage of their revenue due to the banking/housing crisis, or had their borrowing capabilities reduced, or have been dropped completely by their respective banks.

      My company has lost half of its average yearly revenue due to the banking crisis, yet I have not been provided any reimbursement assistance by the federal government; nor have I sought payments from those culpable for our losses, including the federal government, its regulators and the financial institutions themselves.

      The banking crisis is not confined to the Gulf region and has affected a greater number of businesses across the country. So when the administration decided it was proper to use federal power to extort funds for businesses hurt by the oil spill on the Gulf Coast, why did it not do the same for all the businesses hurt nationally by the banking crisis; especially when the financial institutions collectively have deeper pockets than one oil company, namely BP?

      The public needs to understand that the two “crisis” are similar in many ways. To list a few, both oil and banking industries are heavily regulated and subject to ongoing federal oversight, both industries have been demonized by the administration and the press for historic abuses and greed, both industries have been poorly served by federal regulators who have failed to do their jobs properly (which may have averted each crisis), both will be subject to bigger government reaction and newer, stronger regulations from Congress responding to the administration’s need “to do something”.

      But as much as these “crisis” are similar, these industries have been handled very differently by the administration.

      The banking industry was offered TARP as a lifesaving measure because they were too big to fail. The administration pushed Congress to pursue bigger government answers to confront a nationwide problem they helped create. And the administration has done nothing for the businesses (the actual job creators) that have been crushed by the aforementioned bank’s unwillingness to extend credit to most businesses. The administration did not offer any support for the legitimate business losses for those directly affected by the banking crisis. Yet the financial institutions that caused the crisis continue to reap large profits without any relief to the businesses that continue to be affected.

      The oil industry continues to be a target of the administration whose agenda includes the eradication of fossil fuels in pursuit of green technologies. The administration’s focus is on pushing all blame for the current Gulf crisis on the industry (and BP specifically), accepting none of their own mismanagement and regulatory failures, and pursuing every dollar possible to “politically” reimburse Gulf Coast businesses for their losses.

      I am trying to understand why the administration chose to pursue the reimbursement of legitimate claims for Gulf Coast businesses while not even considering the losses incurred by business affected by the banking crisis.

      There is an inherit risk in business ownership that should be taken into consideration when setting this dangerous precedence of government-enforced reimbursement for Gulf Coast business losses from the private sector. But I believe there is even more danger in the federal government being selective in providing said enforcement.

      I am sorry for the losses that will be absorbed by Gulf Coast businesses and hope that each business owner can survive; but I am not sure that an oil rig accident (it has not been proven to be a criminal act) or even a hurricane in the Gulf Coast for that matter should cause the federal government to extort money from the private sector to compensate individual business losses under a free-market system.

      Does anyone else understand the ramifications of the administration’s actions? I cannot believe I am the only one.

    2. Susan C. Gulf Breeze Fl. says:

      Thank you for reminding us that we are supposed to be a country governed by law and not blackmail. The cause of the Deepwater Horizon disaster has NOT been determined. Neither the president nor the Congress has the authority to make this determination. That is the province of the judiciary. Certainly, BP has the authority to voluntarily establish a trust fund for payment of immediate compensation. Neither Obama, Eric Holder or Congress can CONSTITUTIONALLY mandate such an action. BP should be applauded for establishing the trust fund, not demonized by the likes of Henry Waxman.

    3. West Texan says:

      I concur with Amato and Susan’s comments. Of eleven US presidents during my lifetime, Obama takes the prize as the worst. And to all his bleeding heart liberal followers, my sentiment has absolutely nothing to do with his ancestry or skin color. So don’t waste your time.

    4. The Elephant's says:

      President Obama simply does not know how to respond to this crisis, and it shows. He is trying to show that he is involved, he is in charge, and he's going to be very very angry with BP on behalf of the American people, and show that he can make BP pay and pay.

      I'm already reading about the unintended consequences. Businessmen abroad are saying that their contacts are expressing a real reluctance towards investing in the US. For an administration so full of people with law degrees, they surely seem careless about the rule of law. Now they are in charge, they just get to do what they darn well please?

      Obama is sending a dreadful message to private enterprise. You might be wise to take your business overseas. Save up your cash and don't take any risks like hiring more employees. Democrats have always been fairly unfamiliar with the idea of consequences. Things are solved with money — either by extracting it from people or giving it to others — and they get to decide who gets what.

    5. MIchael Blair, Sacra says:

      I am saddened at Obama's continued disregard for the rule of law. Yes, BP is liable and should pay for cleanup costs, but to blackmail a private company is unconstitutional and wrong. I commend Senator Barton for making this clear in today's Senate hearings.

    6. Wayne Hatch, Murphy, says:

      I'm not an attorney. Nevertheless. I would have advised BP not to agree to the escrow fund. The corporation should have continued to operate as they have been doing with respect to claims. Why would I take this position? All you have to do is look at the pending civil suits. One good class action ruling in favor of the injured parties could put BP out of business regardless of the escrow fund.

      I can only see "bankruptcy" in BP's future. This could very well happen prior to any litigation given the immensity of the spill. "Deep pockets" are only so deep.

    7. Pingback: The Absurd Report » An Offer you can’t Refuse: The Twenty Billion Dollar Shakedown

    8. Jim Fowler says:

      We have to recognize at every opportunity our President (junior senator with no execustive experience) struts well in campaign mode.

    9. Russell A. Miller Wi says:

      Would based on recent actions by an alledged lawyer be described as shyster?

    10. Russell A. Miller Wi says:

      It's not easy to moderate a question. An answer would be simply a yes or no.

    11. Pingback: The Absurd Report » Trust Fund Ignores Rule of Law

    12. Leonard Hartman, Kok says:

      Where was the support for Texas Rep. Joe BartonApology to BP?

      Where are the Republican hostality to Obama's shake down of BP?

      So sad! the Republican disappointing reaction!

    13. Pingback: The Patriot's Flag » Barton’s Constitutional Moment

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.