StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Reflections on the oil spill

10 May 2010
Posted by Edmund L. Andrews

     Executives from BP and its partners in the Gulf oil spill will endure a heavy round of indignant and righteous grilling at Senate hearings on Tuesday, and they deserve it.

    But it's also obvious that Congress and the Interior Department failed in all sorts of ways over the years.    And there's a broader lesson here: after a quarter-century of rising anti-government zeal, government is emaciated, hollowed-out and as ineffectual as Brownie during Katrina.

    But back to BP.  For starters, there is the matter of that $75 million limit on the liability for commercial and business losses caused by an offshore oil spill.  That limit is likely to be absurdly low, given that the fishing and tourism losses alone will likely run into the billions.  But the cap is in the law that Congress approved when it was trying to deal with the Exxon-Valdez disaster, and it will be hard to fix it retroactively.

       BP executives told Sen. Bill Nelson of Florida today that they will pay more than the limit, Nelson told CNN today  (video posted on Daily Kos), but Nelson was far from persuaded the company will make good on its obligations.  

     The Obama administration and congress are now rushing  to retroactively raise the the limit to $10 billion, but you can bet that BP would fight such a law with all the lawyers it can buy.    Why on earth did Congress get hornswaggled in the first place? Let's just say it was consensual.

    The Interior Department's hapless Minerals Management Service failed miserably as well.   As the Wash Post reported a week ago, MMS  exempted BP's ill-fated rig last April from a rigorous environmental analysis after concluding that a big spill was extremely unlikely.  

   Less than a year ago, it gave BP's partner, Transocean a "Safety Award for Excellence" ("SAFE," get it?) for its work in the Gulf.  Randall Luthi, the MMS's last director under President Bush, is now president of the National Oceans Industries Association.     The Bush-Cheney, Texas-Wyoming crowd passionately wanted to ramp up drilling logging and mountain-top mining.  It had a zero-tolerance policy toward objections of any kind.

     I have a personal take on the MMS.  Back in 2006, I wrote a long series of stories about how the agency was losing tens of billions of dollars in royalties on oil and gas being pumped in the Gulf of Mexico.  (They still are, by the way.)  The MMS's accounting was disastrously muddled; political hacks under Bush were blocking the agency's own auditors; and the Interior Department had fouled up leases going back to the Clinton administration.  My stories unleashed a slew of investigations, which not only confirmed jaw-dropping incompetence and subservience to industry but also the famous sex-and-drugs scandal in which MMS employees in Denver partied hardy with oil execs.  

       Now, it's true that the Interior Department and the MMS were in some ways uniquely awful -- especially under the Bush administration.   Earl Devaney, then Interior's inspector general, summed up his disgust in September 2006:

    "Simply stated, short of a crime, anything goes at the highest levels of the Department of the Interior.   Ethics failures on the part of senior Department officials -- taking the form of appearances of impropriety, favoritism and bias -- are routinely dismissed with a promise 'not to do it again...'

     Absent criminal charges, however, they are sent off in usual fashion with a party paying tribute to their good service; wishing them well, to spend more time with their family or seek new opportunities in the private sector.

      But there was a broader lesson here: antipathy toward government -- any kind of government -- was at all-time highs.  Republicans, and to a lesser extent Democrats, were hitting the peak of a 25-year rise in anti-government skepticism.  If nobody thinks government can do anything good, then you attract mostly cynics and losers who are mainly interested in leveraging their jobs into lucrative deals with industry.

     This wasn't unique to Interior and MMS.   The SEC, which was a feared and prestigious enforcement agency back in the 80's (under Reagan, btw), became a laughingstock.   The bank regulators competed with  eachother to make life easy for the banks, on whom most depended for their fees.   It was the same deal almost everywhere else: consumer protection, food and drug regulation, occupational safety, the Justice Department.

     By the end of the Bush administration, they were all emaciated, hollowed-out shells.  Now we're discovering, a little late, that those gray government civil servants and those musty federal buildings  might actually be good for something after all.  













On the other hand....

The complete incompetence of so many branches of the federal government under Presidents and Congresses of both parties can be seen as an argument for viewing them with skepticism and contempt. There's a reason that Reagan's claim that Government was the problem was effective.

In other words, the incompetence came first, the contempt followed.

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