Today a subsidiary controlled by the China National Offshore Oil Corporation, a state owned enterprise of the People’s Republic of China, teamed up with Canadian company Nexen to control up to 6 Gulf of Mexico offshore leases, highlighting an urgent need for Congress to ensure that leaseholders – not taxpayers – are financially responsible for all damages related to oil spill accidents. The Chinese entity Cnooc Ltd states in its SEC filings that the China National Offshore Oil Corp “largely controls us”.
Under current law, all leaseholders in offshore drilling need pay no more than $75 million in the event of an oil spill. In the case of the BP Gulf of Mexico disaster, the company voluntarily agreed to set aside $20 billion for oil spill cleanup. It is imprudent policy to assume that companies or foreign governments will enter such a voluntary agreement in future. It must be enshrined in law.
In the wake of the BP disaster, the U.S. House of Representatives passed a measure that would have required companies that drill offshore to be liable for all spill-related damages. This prudent measure would have held oil companies accountable while protecting taxpayers. But it never got off the ground in the Senate because lawmakers caved to lobbying from the oil industry, which strenuously objected to any requirement that oil companies (or in this case foreign governments) be fully liable for cleaning up their messes.
Today’s announcement introduces a new dynamic to this taxpayer risk. Previously, only corporations have seen liabilities capped for oil spills. Now, because of the failure of Congress to act, American taxpayers must bear the bulk of the cost of an oil spill caused by an entity owned the Chinese government. (It is important to note that the current liability cap applies only to accidental spills; in cases of negligence, the cap is not applicable. However, it can take years to determine a finding of negligence and get the company to pay. Absent that finding, taxpayers are on the hook.)
Repeated examples of entrenched interests receiving unfair, generous taxpayer subsidies are what outrages both the Occupy movement on the left and the tea party on the right. The status quo of freeloading at the taxpayer expense must end. Congress must stand up to oil company lobbying and Chinese national government pressure to ensure that oil drillers – not taxpayers – are financially accountable for their accidents.
-Tyson Slocum is director of Public Citizen’s Energy Program. Follow him on twitter @tysonslocum
The Department of the Interior (DOI)’s five-year offshore oil-drilling plan, announced today, is bad news for the environment and oil workers. Environmentalists and workplace safety advocates who reasonably anticipated regulatory reform of the oil industry in advance of any new offshore oil-drilling policy are deeply disappointed. According to the Obama administration, new areas in the Gulf of Mexico will be explored and drilled, as will the Beaufort and Chukchi seas in the Arctic Ocean and the Cook Inlet off the coast of Alaska.
This plan was made in the absence of new safety rules designed to protect workers and the environment. We haven’t updated offshore drilling laws since 1978 – well before we had a deepwater or robust arctic drilling industry. We already know what happens when the oil industry is inadequately regulated. For 87 days in 2010, the nation watched helplessly as millions of barrels of oil gushed into the Gulf of Mexico after an explosion rocked the Deepwater Horizon oil rig and killed 11 workers. Taxpayers remain responsible for major spills, because current law caps spill liability for oil companies at $75 million.
What’s wrong with this picture?
Oil spill response legislation has stalled in the Senate.
Gulf shrimpers are having their worst season in more than 50 years.
Two thousand claims a week are still rolling into the Gulf Coast Claims Facility.
On Wednesday, the Bureau of Safety and Environmental Enforcement issued a permit to BP to drill its first deepwater drill since the devastating Macondo well blowout in April 2010. This came just two days after the company reported its third quarter earnings; profits nearly doubled from the same quarter last year, from $1.8 billion to $4.9 billion.
According to The Houston Chronicle, BP plans to drill the newly approved well in 6,034 feet of water – about 1,000 feet deeper than its doomed Macondo project. Drilling could begin within days using Seadrill’s three-year-old West Sirius semi-submersible rig.
Meanwhile, shrimpers along the Gulf Coast are calling the season the worst in memory. Some fishermen said their catches were off by 80 percent or more.
And while the BP Compensation Fund has paid out nearly $6 billion of the $20 billion escrow account to those harmed by the spill, BP has yet to pay oil spill penalties under the Clean Water Act and other federal regulations. Critics of the fund also note that 300,000 claims have been denied. In the event that the $20 billion has not been paid out by the time the fund expires in August 2013, the balance will be returned to BP.
Stop me if this sounds familiar: Republicans blame Obama for high gas prices, and to blunt their attacks, the President announces a major expansion of offshore oil drilling. That was the scene in March *2010* when Obama proclaimed his support to drill off the Alaska coast, open up the eastern Gulf of Mexico and offshore Virginia. As I wrote at the time, the President’s drilling plan was
intended to blunt expected GOP campaign attacks that Obama the socialist environmentalist has caused gasoline prices to rise $1/gallon since taking office. I see Obama’s move more about controlling the tone of the upcoming mid-term elections . . . After all, analysts are predicting $110/barrel oil by July and the Administration is seeking to head off the GOP hystaria when that happens.
Of course two weeks later the Deepwater Horizon exploded, killing 11 people and unleashing 5 million barrels of oil into the Gulf of Mexico. I wrote that Obama’s earlier pro-drilling stance compromised his credibility. Fast forward to May 2011, and the President simply dusted off his 2010 drilling plan – sans offshore Virginia – and presented it as a “new” energy policy. The President knows that opening these areas to drilling will have an “insignificant” impact on lowering prices and imports. So just as in March 2010, the President’s support of expanded drilling is intended solely to blunt GOP attacks and help Obama frame the election on his terms.
But opening more access to drilling before we have passed the comprensive reforms needed after the BP Gulf of Mexico fiasco is a recipie for disaster.
Public Citizen’s energy program have a lot to say about BP one year after the disaster. We have a long history of fighting dirty energy here at Public Citizen so when the spill happened, we unfortunately were not surprised. To us, the spill provided a tragic back drop for us to highlight all that is so wrong with the way we handle safety regulations and energy policy in America.
On the front page of Alternet today, a blog by Tyson Slocum tells of the sad reality: One year later and it’s almost as if the president and Congress have forgotten the Deepwater Horizon Disaster even happened.
Sure, President Barack Obama reshuffled the Department of Interior’s offshore drilling regulators and issued a deepwater drilling moratorium while making small improvements to safety and environmental reviews in response to the disaster. But that’s like rearranging the chairs on the deck of the Titanic. Congress still hasn’t passed a package of basic drilling-related measures that would substantially improve worker and environmental safety. And the oil industry still hasn’t come up with any fail-safe device that works well in deep water.
The questions Slocum poses are critical ones we need to ask ourselves, our family and friends, our representatives and our president as we approach the anniversary of the Deepwater Horizon oil rig explosion tomorrow:
If the 4 million barrels of oil pouring into the Gulf of Mexico didn’t prompt them to act, would 10 million?
If the 87 days of around-the-clock experts failing to plug the oil didn’t trigger change, would 150 days?
If 11 workers killed on the oil rig didn’t spark them to enact reforms, would the deaths of a whole fleet of workers?
Read the full blog post here and be sure to share with friends.
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