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  • Should BP Be Allowed Back in the Gulf?

    It’s a sensitive question for some and several media outlets created a buzz when rumors circulated that BP and the Department of Interior had reached a deal to commence drilling again nearly a year after the spill. Department of Interior Secretary Ken Salazar quickly rebuffed any claims that BP and his agency had reached some sort of agreement to resume drilling in the Gulf of Mexico.  Bureau of Ocean Energy Management, Regulation and Enforcement spokeswoman Melissa Schwartz confirmed that there was no special deal in place with BP, saying, “There is no deal. There is no agreement. There is no draft agreement. There are no ongoing talks. There are no ongoing negotiations. We issue permits based on the merits of the application. We have issued no permits to BP to date.”

    Secretary Salazar emphasized that “We treat every company with the same set of standards that we would treat everybody else. There is nothing here with BP that is different from what we will be doing with all the other companies that operate in the Gulf of Mexico.”

    And that is part of the problem: treating every company with the same set of standards.  Under the current system, there is no alignment of risk and behavior.  An auto insurance company does not treat the driver with four crashes on his record the same as the driver with the spotless record.  BP’s record has been far from spotless.

    Yet, the current system is set up to treat everyone equally.  The law currently caps liability, (the secondary costs that stem from offshore oil and gas accidents) at $75 million, with up to an additional $1 billion available from the Oil Spill Liability Trust Fund paid for by a per-barrel tax on imported and domestic oil. The liability structure in place does not sufficiently align risk and liability with individual behavior. It socializes risk by spreading the costs across the entire industry and does not inherently promote safe operations.  One could argue that the cost of a spill alone (economic, environmental, bad press, having an administration shut down permits and production) is enough incentive to promote safe drilling.  But the current liability system removes part of that incentive and policymakers should work to fix it.

    A large part of the solution should be to allow private risk assessors to determine liability. Private risk assessors, not bureaucrats and politicians, should determine the liability associated with covered activities. These professionals maintain the specialized knowledge and expertise to accurately assess the risk of offshore oil and gas operations. They use many variables, such as safety records and depth and pressure of wells, to calculate their assessments. Private insurers can then use that information to determine the premiums required to insure against potential liabilities. It would create a better system where premiums would increase as a result of spills and safety violations.  Thus, BP’s liability and insurance premium would be much higher than that of a company with a better safety record.

    A comprehensive oil spill liability reform proposal would integrate the ideas of risk assessment and tie it together with a newly established insurance pool.  To further promote safe operations, industry should set up an independent safety organization. The organization would share safety standards and practices, including quality assurance and operating and management procedures and would safety rating system. Insurance companies could then choose to base their premiums in part on the rating.

    A new liability structure would seamlessly transition us to a system that removes the liability cap and ensures that companies will have the ability to go out and drill if they can prove they can handle the liability.  It would promote safety and allow drilling to continue offshore if a company can cover its liability.   In this instance, the market will determine if BP should go back to work in the Gulf.

    Posted in Energy [slideshow_deploy]

    13 Responses to Should BP Be Allowed Back in the Gulf?

    1. George Colgrove VA says:

      Yes! With all the rest! Let us get drilling!

      The so-called "BP oil spill" had its roots with the federal workforce. They actually gave the rig an award! If the Contractor for BP was lax – it was because the feds allowed them to be lax. Simply put. The danger in the gulf was the feds NOT BP!

      The Feds give frequent wavers for inspections. I am not opposed to that since I strongly believe the feds have too much of a heavy hand on everything. The person granting waivers probably knew of the burdensome nature of the regulations and knew the rig operators were professionals – so they rightfully granted waivers.

      However, this is the smoking gun proof why we should never allow ONE MASSIVE and INEFFECTIVE/INEFFICIENT organization oversee EVERYTHING in this nation. No matter how reasonable granting waivers are or having the regulations in place to begin with is, having too much responsibility centered in a single mindset is dangerous.

      I strongly believe in self-regulation. Now liberals will obfuscate that self-regulation leads to massive profits and that is evil. Look what centralized federal regulation is doing to this country. First of all feds are raking in the cash in their very high compensation packages and kickbacks from the companies they are overseeing, so that may add proof to their claims. But, with inefficient and dare I say lazy feds who have absolutely no skin in the game (other than to receive their unreasonably high paychecks) lording over private sector companies who YES, WANT TO MAKE A PROFIT, we are losing ground competitively. We are drowning in artificially high costs in operating a business. Moreover, we are becoming blind to highly important but very small details.

      There are probably hundreds of thousands of different things to check on an oil rig, and the risk of human error is very high. But rather than have a company who HAS TO DO THINGS RIGHT to make a profit, and who has not only skin in the game, but also flesh and bone as well, have control over the inspection schedule and management, we have a bunch of overpaid stuffed shirts from DC come in with a pompous attitude lord over the rig operators for a few days while they self-define their own importance. These big shots come in and allow the rig operators access to their federal computers to access adult material. Then without so much as a glance, they are on their way.

      With the taxpayer paid helicopter, pilot, and whatever else, these feds get a nice few days out of the office to shoot the "whatever" with their buddies then head back to the office. This is costing the taxpayers with NOTHING coming out of it – since the feds see the money they get from us as FREE! Profit makes people do things. Like conserve dollars. Self-regulation WITH FEAR of something like the explosion happening, and having 100% responsibility and accountability, will make a company and industry inspectors follow an inspection schedule to the tee. Everything will get far more than a glance. Feds, as it can be seen in the aftermath of the rig explosion and the subsequent oil spill have immunity to the financial risk of not performing their vital duties. The Obama administration has exposed the federal workforce in that they will point the finger of blame, obfuscate, and in the end walk away with very no responsibility for their failure. Companies like BP walk away with the tab.

      Federal inspection, be it with food, energy, safety and so on gives a false impression that all is OK after the inspection. But if you are an overpaid, elite stuffed shirt from some DC federal office building suffering from a very high ego problem, you cannot even start to know the insides and out of something as complicated as an oil rig. Moreover, you should be as far away from that rig as I should be.

      BP was not the problem here, it was the feds. The question should not be "should BP be allowed back in the gulf" but in these hard economic times and debates on where to cut the size, scope and cost of the federal government, we should be asking, "should the feds be allowed back in the gulf?"

      Completely cut out the MMS (both halves) and the The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) who is currently blocking over a hundred permit requests for drilling in the Gulf. Let the industry make its own regulatory body and let them deal with the insurance companies on how tight the inspection regiment will be. All of these entities have skin in the game – the feds don’t. The feds have proven; especially under Obama that they would sooner see America die than have us enjoy the richness of our own natural resources. That is the only place where the federal workforce has skin in the game – that and their unreasonably high compensation.

    2. Mike, Wichita Falls says:

      Has the House Energy & Commerce Committee asked Heritage to testify about such a market-based system? If not, they should.

    3. aspergus says:

      What a stupid question!–If you haven't made a mistake –you have not been doing any thing–BP spends million before it sell you one single gallon of fuel

      So wake up and grow up –It's high time we get busy being a Republic and

      not a socialist state contary to what the dems. thinks

    4. Dave Bassignani says:

      YES!!!

    5. Lloyd Scallan (New O says:

      It is true that Obama's lackeys at the BOEM and Salazar are "treating everyone with the same set of standards". They are forcing every oil company to jump through extream bureaucratic hoops that makes applying for a drilling permit as painful as possible. Could it be due to the fact that of every person at the BOEM, not one has offshore drilling experience or direct knowledge of oil companies?

      Now, the author is endorsing even more layers of bureaucracy to further decourage applications, with a fictional "comprehensive oil spill libility reform preposal". If this Obama led government, and sadly HF, does not get off the backs of the oil industry with ridiculous and unnecessary red tape, we will see not only gas prices at $10.00 per gallon, but everything we use in our daily lives rise to the point that might very well prevent us from living our American way of life.

      To answer the question posed in the title, YES, BP should be allowed to again

      drill in the Gulf. What is being forgotting is the reason the blow-out became a major spill in the first place.

      The actions and non-actions of Obama made the "crises" grow to major proportions because of his deliberate manipulatiing of government agencies that prevented early retention and his refusal of foreigh help by employing a 100 year old law (The Jones Act) that could have been waived with the stroke of his pen, as Bush did in Katrina.

      What has also been lost in all of these distractions from the truth is the absolute cover-up and falsification of the real reason the BOP failed to shut-in the well after the blow-out. To anyone that has experience in the offshore drilling

      industry, the various lies that are being used to cover the fact are completely

      transparent.

      We all should remember Obama needed this "crises" to be as destructive as possible to shut down offshore drilling which, in his sick mind, would "nudge" us

      into his oil free future.

    6. Leon Lundquist, Dura says:

      Oh! That Ken Salazar! What a piece of work! He came into power in Colorado when the Liberals 'took over' the State (with out of State money). You can't even breathe in Colorado anymore, it is the People's Republic all over again! We would be down the tubes if the Voters had not passed the Balanced Budget Amendment! (Liberals hate that, fought it all the way! Imagine!) Since the Progressives work on a spoils system, Salazar got his Federal Appointment for his 'work' Socializing Colorado. We have every brand of Thought Crime, every kind of fell Junk Social Science. Small States get overrun, like Alaska!

      Salazar's Policy Statement has the same illogic to it that got us a fake "Budget Freeze" after the Budget was highest ever! Liberals call that 'austerity?' I am not at all surprised this Colorado criminal is up to dastardly dirty tricks working for the Feds. Look at all Obama's gangsters! They get their appointments for committing crimes against American Liberty! If you want to find High Crimes? Easy! Just look into the victors getting the spoils! Like Sec. Salazar!

      Defund and abolish his whole Department of the Interior! If they didn't lock up our National Parks we wouldn't really miss them. Salazar out there wrecking things? "They'll none of them be missed!" to quote the Mikado. That's how zany the Progressive Agenda is, comedy.

    7. Jeff says:

      without some sort of liability cap only the largest of the oil giants will even attempt to drill … there is a reason it was put in place …

      I assume you are also all for eliminating government sponsored flood insurance as well …

    8. Pingback: ~ JUST IN ~ Daily News Digest for Thursday, April 7, 2011 | Just Piper

    9. John Rough 2097 Spri says:

      Does not BP have substantial investments in alternative energy?

    10. Tony, Miami says:

      Yes. I feel, that an unforeseen equipment failure combined with the typical human nature of over confidence when doing something routine, led to the accident. It is unfortunate for the families and friends of those who died. However, I give these example of why I think we should allow them to proceed.

      As a country, do we…

      - stop driving when there is a driving fatality?

      - stop flying when an airplane crashes?

      - pull out of a military campaign when our first solider dies?

      - stop eating because someone died of salmonella?

      - stop the fight for freedom because the oppressors are gaining momentum?

      As long as we need oil, the need to increase our own production and availability to supply the demand goes hand in hand with our sovereignty. However, enough with taxpayers forking the bill for the liability. This industry is self sustaining and should be out of their pockets by the way I personally own BP stock.

      Finally, I feel the real reason the accident became a disaster was as a result of our government (and its environmental loonies) requiring for the fire to be put out. Only when the ship (rig) was flooded and sank did the pipes become irreparable and available solutions were inadequate. Had it been allowed to burn off as solutions were properly assessed they could collectively as an industry come up with much better results.

      Thank you Heritage for your great work!

    11. Ann Cavage Hammonton says:

      Yes I think BP should be aloud in the Gulf. I believe this was sabotage since it happened on earth day. The Fed Govt kept clean up from happening quicker, and it did not turn out to be as bad as they thought. All told accidents are rare, and clean up can be done much quicker.

    12. Optomistic, State Co says:

      As far as these oil companies, I believe there should be a regulation and inspection team not connected in any way with the government to regularly inspect these oil rigs.

      I believe, however, that this oil explosion in the Gulf was not an accident. This is my opinion. Was there any entity not connected with the government that did an inspection of the rig, both on top and underneath in the ocean for descrepencies or foul play? Were the men on the rig that survived questioned for any information they could give concerning the blast? In other words, was there a thorough in vestigation of the total rig and crew working on that rig? I may have missed it, but I haven't heard anyone say that all this could have been a put-up job to halt our drilling in the Gulf and other off-shore drilling. This topic just has never come up that I know of. Our president seems to be able to get away with about anything without being scrutinized these days. Are we afraid to speak out against a man who is slowly destroying a once great nation, the United States of America?

      In Wisconsin, the legislators who are trying to bring order to our economic collapse, are being criticized and vilified for trying to do the right thing, while the legislators who vacated their positions as legislators and went into a different state to keep from voting are getting away scot free. I guess people can be loyal as long as it doesn't touch their pocketbooks, but when they have to give up a little to gain stability in the economy, that is a horse of a different color.

      The Bible says in Isaiah 5:20: "Woe unto them that call evil good, and good evil; that put darkness for llight, and light for darkness; that put bitter for sweet and sweet for bitter!" It looks like we are living in those days, and once again, God's Word proves to be true. Thank you for listening.

    13. Mark says:

      Well the well is still spilling oil to this day and leaking out around the hydra soil. Just not shooting straight up. The main concern is the habitat and the aquatic life we ingest everyday from the gulf. They can't stop the spill and plutonium is now mixed in the spill. So I say make every politicians who claims it is safe again to have to eat that Aquatic life on their plates and their next 2 generations have to do the same. Want to see how fast they don't? Oh that's right they get theirs from somewhere else at our expense. The gulf seafood that does survive is our poison. And Corporations like BP and government don't care. Just the money is important to them.$$ Cha Ching$$! All at Americans Lives. You know an old Volkswagen beetle got 60 mpg and add emissions it will get 50mpg. That's why they stopped making them. Because Corporations make money off of the gas we burn. Haliburton Dick Cheney's company has been making all the money from the war and he even is building a mansion or has built, to have residence in Kuwait to control all the oil there. Did you know that European nations want him on war crimes for war profiteering? The rules only change when it applies to our own politicians I guess. There is a lot to learn, get informed and stop saying to yourselves there is nothing you can do about it. Bring back the nation we are supposed to be. Stop whining and get off your duffs and stand up for yourselves. You are supposed to be American. Duh!

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