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BP’s payment of damage claims: Watch what they do, not what they say

Robert Reich, professor of public policy | May 18, 2010

Saturday the White House warned BP that it expects the oil giant to pay all damages associated with the disastrous oil leak into the Gulf of Mexico, even if the costs exceed the $75 million liability cap under federal law. BP responded Sunday saying its public statements are “absolutely consistent” with the Administration’s request.

When you hear dueling public statements like these, watch your wallets. You can safely assume BP’s lawyers are already at work to ensure that the firm pays not a cent more than $75 million — not to taxpayers bearing cleanup costs, not to consumers whose gas bills will rise, not to businesses along the coasts that will lose a fortune. And BP won’t pay more unless or until there’s a law requiring it to.

BP has been making public statements about its supposed corporate social responsibility for as many years as it’s behaved irresponsibly. It’s the poster child for PR masquerading as CSR.

It was just eight years ago British Petroleum shortened its name to BP and began promoting itself as the environmentally-friendly oil company with a vision that went “Beyond Petroleum” to embrace solar cells and wind power. In a $200 million advertising campaign organized by Olgilvy & Mather, BP transformed its corporate brand insignia from a shield to the more wholesomely natural green, yellow, and white sunburst. BP’s chief executive, Lord John Browne, issued warnings about global warming and said the company had a social responsibility to take action.

Notwithstanding its new image, BP continues to be one of the largest producers of crude oil on the planet. Although it committed itself to devoting $8 billion to alternative fuels over ten years, the sum was tiny compared to BP’s annual profits from oil that have averaged over $20 billion and its annual capital expenditures of over $14 billion.

Nor has the firm distinguished itself by its commitment to the law. Several years before the Gulf oil rig explosion, an explosion at BP’s Texas City plant killed fifteen workers and triggered a $21.3-million fine from safety regulators.

In March 2005, corrosion of BP’s pipes and equipment on the North Slope in Alaska led to a spill of 270,000 gallons of oil, the largest spill ever recorded in that fragile territory. Critics said BP wasn’t spending enough money to prevent such spills. Only in 2006, after it was forced by the U.S. government to inspect all its pipelines with an automated device that crawled through the pipes, did the company discover so much additional corrosion and leakage it had to shut down a sixteen-mile feeder line to the Trans Alaska Pipeline.

In August 2006, Congress demanded BP executives appear in person to be held accountable. At the ensuing hearing, members from both sides of the aisle accused BP executives of crass negligence. Representative Joe Barton (R-Texas), chairman of the oversight committee, excoriated them: “If one of the world’s most successful oil companies can’t do simple basic maintenance needed to keep the Prudhoe Bay field operating safely without interruption, maybe it shouldn’t operate the pipeline.” Barton went on: “I am even more concerned about BP’s corporate culture of seeming indifference to safety and environmental issues. And this comes from a company that prides itself in their ads on protecting the environment. Shame, shame, shame.”

Committee members then grilled the BP executives about why the company had failed for as long as fourteen years to do the sort of internal inspection and maintenance on its pipelines that were performed every two weeks on the Trans-Alaska Pipeline, into which the BP pipelines feed. The BP executives solemnly promised to be more careful in the future.

But neither the members of Congress nor the BP executives mentioned the most pertinent fact: Frequent inspections of the Trans-Alaska Pipeline were required by law but no similar inspections were required on feeder pipelines such as those owned by BP. If the panel was serious about getting BP to change its ways it would have introduced legislation to close this loophole. The panel did not introduce such legislation because the hearings were for show. Barton and his colleagues on both sides of the aisle had pushed many bills favorable to the oil industry and weren’t about to impose any burdens on it.

Ad campaigns about corporate social responsibility are cheap. So are public scoldings by politicians about a corporation’s irresponsibility.  Watch not what they say but what they do. The only way BP will pay more than $75 million — and the costs of the spill will easily top that — is if they’re required by law to do so.

This post was also  published in Robert Reich’s Blog.

Comments to “BP’s payment of damage claims: Watch what they do, not what they say

  1. Robert, I’m afraid that this is history repeating.

    BP has set up a spill response fund since your post, but it only revealed what their agenda really is:

    When Exxon Valdez oil spill took place, the company set up a fund much like BP did now, in which they dumped a nice chunk of cash, but then put up a legal fence to make sure not a cent is spent from the fund until the sum has been reinvested and turned a profit several times over.

    To this day the full damages have not been paid. I wouldn’t be surprised if 20 years from now we don’t look back at the BP spill and realize we’ve been duped once again.

    I have an oil tank removal business and deal with spills all the time (although on a much smaller scale), and so I’m constantly reminded of the damage oil leaks can do (as well as how laws only protect us when convenient)
    As much as I’d like to believe that the White House could force BP do anything, the oil companies are much more long-lived than most presidential administrations…

  2. Just saw a program on the ABC recently that shows BP as the most ecologically disaerous company in the world today. They have more accidents and explosions on their compared to other comapanies. I know do not buy my fuel from BP they are ecologically unsustainable.

  3. Will there ever be true accountability to governments or big businesses when there is money involved? Sometimes the government is just as much to blame as the businesses. Laws should be passed to force money out of BP (not to the point of BP collapsing however).

  4. It’s very disheartening in this day and age that even though a company is accountable for damaging OUR world that they would lack the integrity to fully take on the responsibility to remedy the situation.

    • Karl, it is much, much more disheartening to know that University of California regents, administrators and the majority of the faculty ignore the needs of humanity by producing holocaust bombs as well as partnering with BP as if their BP-UC Ivory Tower was on another planet studying mankind as lab animals through their microscopes in the sky.

      This has been the defining cultural value for the last half century, thus California and Humanity are suffering the consequences of UC cultural failures with no end in sight to the disasters that UC aristocracy have participated in creating.

      The failure of California’s educational elite is one of the worst failures any civilization can suffer, proving that the Powers That Be today are no better than any others in history, in fact making v.21C PTBs worse than all others because they should have known enough to avoid the calamities they are causing, as Sir John Maddox, Freeman Dyson, E.O. Wilson et al. have concluded.

  5. BP has indicated that it will not be invoking the $75 million cap on third-party damage claims. Instead, it has made the following statements publicly regarding payment of claims:

    – BP takes responsibility for responding to the Deepwater Horizon oil spill. We will clean it up. BP has established a robust process to manage claims resulting from the Deepwater Horizon Incident.

    – BP will pay all necessary and appropriate clean-up costs.

    – BP is committed to pay legitimate and objectively verifiable claims for other loss and damage caused by the spill – this may include claims for assessment, mitigation and clean up of spilled oil, real and property damage caused by the oil, personal injury caused by the spill, commercial losses, including lost of earnings, profit and other losses as contemplated by applicable laws and regulations.

    • Adam, your statement “BP is committed to pay legitimate and objectively verifiable claims for other loss and damage caused by the spill – this may include” ends with the words “may include” which means that their word is as good as the integrity Berkeley no longer has since they sold out to BP control of their research. As Robert Reich said: BP alliance could be either “a huge feather in Berkeley’s cap or a huge noose around Berkeley’s neck” and the Berkeley aristocracy is now twisting in the wind hanging at the end of their nooses.

      As the Durants concluded their lessons of history, a paramount lesson is that civilizations fall due to failures by politicians (Washington) and intellectuals (Berkeley) who failed to deal with the challenges of change. Our politicians obviously failed when Washington sold out to the military-industrial complex (including BP)scores of years ago before Ike warned us, so now the people on the Gulf Coast may never recover from far too many betrayals by Washington politicians plus Berkeley elitist administrators and scholars that enabled out of control global warming consequences that are turning the Gulf, California and the world into a nightmare for future generations to have to survive in.

      Thus today, Washington and Berkeley have created a whole new Ponzi scheme against the world where political-academic aristocrats have returned us to the days of political, economic and moral decline before Archon Solon created Democracy to prevent social chaos in the first place.

      So if you believe what BP says, then you should either run for congress or become and administrator at UC because you will fit right into their arrogant, indolent and ignorant culture.

  6. We’ve just had an near environmental catastrophy here on the Great Barrier Reef caused by a chinese cargo ship (apparently) taking a shortcut and running aground.
    I hope you have better luck getting those responsible to pay than the Ausssie Government has had with the Chinese.

  7. Robert, footnotes should be added to include:

    Big Oil buys Berkeley –
    The BP-UC Berkeley research deal pushes academic integrity aside for profit

    President Eisenhower’s Farewell Address to the Nation, January 17, 1961, including his grave warning that Berkeley scientists and administrators still marginalize like so many other lessons of history:
    “The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.”

    As as result of the elitist cultural value of far too many scholars, future generations shall suffer the hellaciously unacceptable consequences of global warming that we have already begun to suffer because of the power of money that BP keeps proving.

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