Lemming Tracks: BP Well, "Gross Negligence," a Contract - and an Alternative

Isn't the Lemming "apathetic?" I've explained that before. There's a really bad oil spill - more like a leak - in the Gulf of Mexico. Most of it's from a British Petroleum drilling rig that blew up, killing 11 people. But not all: the Ocean Saratoga rig's contributing a little. (June 8, 2010)

Someone Must be Blamed: How About Those People Over There?

But let's pretend that the Gulf oil mess is all the fault of that bunch of foreigners, British Petroleum: BP for short. That's what the federal government seems to be doing.

And so is at least one of BP's business partners:

"Anadarko blasts BP for 'reckless actions' "
CNNMoney.com (June 18, 2010)

"...Anadarko, which owns 25% of the Macondo well where the Deepwater Horizon rig was drilling, signed a contract saying that it would pay a quarter of the costs associated with the well, unless BP is found guilty of gross negligence...."
(More)

Take note of that: Anadarko is off the hook, if the "gross negligence" tag sticks to British Petroleum.

Gulf Oil Cleanup Costs

Let's see what the latest guess at what the bill for cleanup may be.

No, never mind the bill. Let's see what the fine may be.

"Day 59: The Latest on the Oil Spill"
The New York Times, U.S. (June 18, 2010)

"...The Center for Biological Diversity filed a lawsuit on Friday against BP, seeking monetary penalties for the oil spill under the Clean Water Act. The group, which sued in federal court in New Orleans, said that if the spill was found to be 'the result of gross negligence or willful misconduct,' it should be assigned the maximum penalty set out by the federal act, which is a fine of $4,300 for every barrel of oil spilled. If the spill continues through August, the center calculated that BP's liability will be about $19 billion, which would be paid into the United States Treasury...."
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[emphasis mine]

That "$19 billion," written as a number, is $19,000,000,000. That's a whole lot of money. Even for the United States Treasury.

I see that "gross negligence" shows up in The New York Times' article, too.

Can't say that I blame Anadarko Petroleum for wanting British Petroleum to be guilty of "gross negligence." 25% of $19,000,000,000 is - let's see - $4,750,000,000. Even for a "Big Oil" company, that's a lot of zeroes.

That $19,000,000,000 figure is probably what's behind the "20 billion" we've been reading in the news lately:

"$20 billion escrow fund a positive outcome for BP"
International Business Times (June 17, 2010)
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Anadarko Petroleum?

Anadarko Petroleum? They're American - and award-winning. With corporate headquarters in Woodland, Texas. (Anadarko Petroleum Corp - Office Locations)

The Anadarko headquarters building is green, too:

"In 2009, Anadarko's corporate headquarters in The Woodlands, Texas earned LEED Certification for its energy-efficient design and updates - making it the first office complex in The Woodlands to earn this designation." (Anadarko)

A Piece of the Action - And an Alternative

It could be worse: British Petroleum could be facing the possibility that it's executives would be hung, drawn, quartered, and finally have their heads stuck on pikes in front of the White House.

As it is, the company will almost certainly be forced to hand over at least $19,000,000,00 to the United States Treasury over the next few years.

That may not seem like a lot of money, but BP's annual profits were $25,124,000,000 in 2009. After taxes, that was $16,578,000,000. (Annual Financials for BP PLC, MarketWatch) That's less than that $19,000,000,00 piece of the action that the feds seem to want.

Yes, BP makes a lot of money. Look at it this way, though: how would you pay a fine that was more than what you earn, after taxes? That's what British Petroleum will almost certainly wind up doing.

Maybe I'm pessimistic, but I don't see the U.S. Treasury letting a windfall like that $19,000,000,000-plus dollars get away from them.

Bounty on Oil: A Common-Sense Alternative?

Between that 'walruses of the Gulf' report and what's been coming out about BP's dicey cost-cutting, I don't doubt that the company is at least partly responsible for the oil that's fouling the Gulf.

And, I think they should pay for the cleanup. More than that, I think they should help out the folks along the Gulf whose jobs have been directly and indirectly affected by the spill - and by the feds' daft decision to shut down all wells. Even the ones that are working.

Put a bounty on spilled oil.

The idea isn't mine, but I wrote a post about it in another blog:

• "Gulf Oil Cleanup Idea: A Bounty on Oil"
  Starting a Small Business Without Losing My Mind (June 12, 2010)

Essentially, the idea is to have BP pay people who collect and deliver oil that's loose on and near the Gulf.

That would penalize BP - although not to the 'off with their heads' extent that some might want - and more importantly it would get money into the hands of folks who live along the gulf.

The downside, as I see it, to the 'bounty' idea is that it doesn't give a piece of the action to the feds. Maybe the U.S. Treasury could fine the folks collecting the petroleum for something.

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More from the news:

"Anadarko blasts BP for 'reckless actions' "
CNNMoney.com (June 18, 2010)

" 'The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP's reckless decisions and actions,' Anadarko chief executive Jim Hackett said in a statement issued late Friday.

"Anadarko Petroleum, a minority partner in the ruptured well in the Gulf of Mexico, blamed BP for 'reckless' behavior, seeking to distance itself from the worst oil spill in US history.

"Anadarko, which owns 25% of the Macondo well where the Deepwater Horizon rig was drilling, signed a contract saying that it would pay a quarter of the costs associated with the well, unless BP is found guilty of gross negligence...."

"Day 59: The Latest on the Oil Spill"
The New York Times, U.S. (June 18, 2010)

"BP Makes a Change on Response Efforts

Tony Hayward, the public face of BP since oil began gushing into the Gulf of Mexico in April, is stepping away from his daily involvement in the company's response efforts. Mr. Hayward, who will remain as BP's chief executive, will hand off the duties of overseeing the daily spill operations to Robert Dudley, an American oil executive who has been a managing director of BP since 2009. The change came a day after Mr. Hayward went before a Congressional committee in Washington and received a drubbing from lawmakers who are angry about the slow pace of efforts to stop the oil leak, which has become one of the worst environmental disasters in American history...."

"...The Center for Biological Diversity filed a lawsuit on Friday against BP, seeking monetary penalties for the oil spill under the Clean Water Act. The group, which sued in federal court in New Orleans, said that if the spill was found to be 'the result of gross negligence or willful misconduct,' it should be assigned the maximum penalty set out by the federal act, which is a fine of $4,300 for every barrel of oil spilled. If the spill continues through August, the center calculated that BP's liability will be about $19 billion, which would be paid into the United States Treasury...."

"$20 billion escrow fund a positive outcome for BP"
International Business Times (June 17, 2010)

"Credit analysts see the negotiated $20 billion escrow fund as a positive outcome for BP because it reduced a significant amount of uncertainty and stretched the payments over 3.5 years.

"The terms include $20 billion set aside in an escrow fund to pay for damages and $100 million in a separate fund to help oil workers who lost their jobs. In addition, BP has agreed cancel dividends for the rest of 2010.

"For the $20 billion fund, BP will pay $3 billion in the third quarter of this year, $2 billion in the fourth quarter, and then $1.25 billion per quarter until the full amount is exhausted. Meanwhile, before the fund reaches $20 billion, BP will set aside U.S. assets to 'assure' payments...."

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More:

• "Oil in the Gulf of Mexico: Posts"