Wednesday, June 2, 2010

BP: ‘Cheney’s Katrina’

The folks at an energy investment bank offered some compelling evidence Wednesday that BP’s rose-colored estimates of the cost of the environmental conflagration it unleashed in the Gulf of Mexico on April 20th may be worse than they think.

CNBC reported that analysts at Tudor, Pickering, Holt & Co. have wargamed a worst-case scenario for ending the Deepwater Horizon oil spill (and with the available evidence from BP, worst-case outlooks aren’t a bad idea).

They found that given the expected highly active 2010 hurricane season and other contingencies, plugging the leaking oil well could well take until December of this year. Handling that and covering the myriad expenses connected with the accident could mean an estimated cost of between $35 billion and $40 billion.

Credit Suisse, the Swiss investment banking concern, says much the same; CS thinks BP’s tab could come to $37 billion, about three years worth of BP’s free cash flow.

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President Obama has been under fire for his handling of the crisis, some saying that the president’s Zen-master cool sends the wrong signal, and doesn’t reflect the urgency the situation demands. Perhaps the president hasn’t popped enough veins in public or chewed on enough of the drapes in the Oval Office to keep his critics happy.

No matter. There’s a new report out, one that’s certain to roil the oily waters in the Gulf of Capitol Hill. It broadens the historical context of the BP Gulf oil spill, and strongly suggests that, 18 months after leaving Washington, the Bush administration is still the gift that keeps on giving.

In the report released today, the Center for American Progress finds that the infrastructure of responsibility for the worst environmental catastrophe in the nation’s history was established by former vice president Dick Cheney and the Bush White House, whose embrace of Big Oil and laissez-faire policies on offshore drilling ultimately made the Deepwater Horizon disaster not just possible, but damn near inevitable.

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Entitled “BP Disaster Is Cheney’s Katrina,” the report by Center researcher Rebecca Lefton, is a well-documented, startlingly procedural breakdown of how we got here. Beginning with the year 2001, Lefton charts the launch of the National Energy Policy Report and notes how Cheney (who resigned a plush gig as CEO of oil-services giant Halliburton to become vice president) was appointed to head up a task force defining the way to execute the Bushie doctrine on energy. From the report:
The task force report was based on recommendations provided to Cheney from coal, oil, and nuclear companies and related trade groups—many of which were major contributors to Bush’s presidential campaign and to the Republican Party. Oil companies — including BP, the National Mining Association, and the American Petroleum Institute — secretly met with Cheney and his staff as part of a task force to develop the country’s energy policy.

The proposal clearly represented the interests of dirty industry, including opening up the Arctic National Wildlife Refuge to oil drilling and encouraging oil and gas production, coal output, and the development of biofuels and nuclear power.
The relationship got cozier still. An energy bill passed by the House that year offered Big Oil/Big Power $33.5 billion in tax breaks and other incentives over 10 years — the intent being to increase oil and gas exploration, develop new coal-burning technologies, and boost the prospects for nuclear energy.

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In 2002, Bush proposed further cuts in R&D funding for biomass, geothermal and solar energy. He made more such cuts in 2003, and again in 2005 — the same year the Bush White House Interior Department made a decision that haunts the good people of three Gulf states, people dealing with the consequences of a policy made five years ago.

From Lefton’s report:
The Interior Department’s Minerals Management Service—the agency responsible for managing oil and gas resources on the Outer Continental Shelf and collecting royalties from companies—decided in 2005 that oil companies, rather than the government, were in the best position to determining their operations’ environmental impacts. This meant that there was no longer any need for an environmental impact analysis for deepwater drilling, though an earlier draft stated that such drilling experience was limited. In fact, MMS “repeatedly ignored warnings from government scientists about environmental risks in its push to approve energy exploration activities quickly, according to numerous documents and interviews.” And an interior general analysis even found that between 2005 and 2007 MMS officials let the oil industry to fill out their own inspection reports.
The fox was truly guarding the henhouse.

In his 2006 State of the Union address, then-President Bush offered his administration’s self-fulfilling energy prophecy when he said “America is addicted to oil” — a no-shit-Sherlock moment that reflected Bush's commanding grasp of what the nation already knew.

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Renewable energy program funding faced more proposed budget cuts later that year and in 2007 and 2008; some of the proposed cuts were mitigated somewhat in Congress, but the baseline pro-Big Oil philosophy was well entrenched. The Bush White House’s intimate relationship with Big Oil & Power was clarified further, and finally, on July 14, 2008, when Bush officially lifted the 18-year-old executive moratorium on offshore drilling off the Atlantic and Pacific coasts and ... in the Gulf of Mexico.

"We need to take action now to expand domestic oil production," Bush said. "... With this action, the executive branch's restrictions on this exploration have been cleared away. This means that the only thing standing between the American people and these vast oil resources is action from the U.S. Congress."

The Bush plan effectively ended the moratorium on drilling in late September 2008; 155 Republicans in the House and 49 more in the Senate promised a battle royal opposing efforts to extend the moratorium, and they made it part of a bill that had to be passed to fund the federal government. That’s when Democrats basically conceded they were powerless to stop it.

Once the ban died the death, the way was clear for oil companies to seek federal approval to drill three miles off the coast of the United States, or farther out.

One of those companies was BP. It began drilling operations at the Deepwater Horizon semi-submersible oil rig 41 miles off the Louisiana coast in February of this year. The rest is the environmental history we're living through right now.

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So the next time you hear President Obama being blamed directly or indirectly for this unfolding environmental tragedy by any of the smug mushwits in the punditburo, be prepared to know better.

Daniel Weiss, a Center senior fellow, clearly does. Wednesday on MSNBC, Weiss said the Bush/Cheney White House “had a policy of ‘don’t ask, don’t tell’ for oil companies ...

“They had many opportunities when they could have established safeguards the oil companies would have been required to have on their rigs, but they chose to make them voluntary. And that’s the legacy President Obama inherited ...”

Image credits: Deepwater Horizon spill from space: NASA. BP logo: BP plc. Cheney: Source unknown. Chart reflecting Big Oil prices and profits under Bush II: Center for American Progress. Deepwater Horizon fire: U.S. Coast Guard.

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