Obama’s Favor to BP: The Gift that Keeps on Giving
By Randall Holcombe • Monday February 21, 2011 10:46 AM PDT • 5 Comments
After BP’s oil spill in the Gulf of Mexico, President Obama demanded that BP turn over $20 billion to the federal government, to be paid as compensation to those who were harmed by the spill. At the time critics lashed out at Obama for his strong-arm tactics, extorting that money from BP, but as I blogged at the time, the president was actually doing BP a favor.
Note that while others complained about the president’s actions, BP quietly went along with no complaints.
Because of their negligence, BP was going to be on the hook for a substantial liability in that case, and they would either have to go through the process of settling with claimants, or going to court to determine their liability for damages. That would have been BP’s legal responsibility, but President Obama let them off the hook, and made it the responsibility of his administration to compensate those who were harmed. People can still sure BP, but because of Obama’s claims process, lawsuits will be greatly reduced.
In addition to the expense involved, BP would have had a substantial loss of goodwill. Lots of people would tend to estimate the harm done to them (in this case, and in any other) as greater than what they eventually would be compensated, and even if at the end of a trial claimants did feel they eventually got what they deserved, there still would be a loss of goodwill because of the adversarial relationship court cases would engender. Claimants would engage in an adversarial relationship and have to defeat BP in court to get compensation.
President Obama has transferred that loss of goodwill from BP to his administration. BP, by providing the $20 billion, is on the same side as the claimants, and they are in an adversarial relationship with the administration.
Earlier this month Kenneth Feinberg, who the president appointed to administer the claims process, met with hostile questioning in separate hearings before the Florida legislature and before a U.S. House of Representatives committee. Florida Senator (and Democrat) Bill Nelson recently asked President Obama for a top to bottom review of the whole process.
Rather than BP taking the heat for any problems in compensating those who were harmed, the Obama administration is getting the bad press. BP deserves that heat, because they caused the harm. Thanks to President Obama, they’ve avoided the bad press and loss of goodwill. Now, because he voluntarily took on the claims process, President Obama deserves the heat. He asked for it. His bad judgment led him to demand that he take on a responsibility that should have been BP’s.
So far the fund has paid $3.4 billion in claims, and has denied about half of the claims that have been filed. That might be fair. I don’t have sufficient knowledge of the cases to say. But it’s not a way to build goodwill. The establishment of that claims process was a big favor to BP, and as the Obama administration continues to get the bad PR that should fall on BP, a gift that keeps on giving.
Tags: Business, Disaster Management, Environment, Law, Media, Nanny State, Politics, Presidential Power, The State 
When I see unsympathetic political titans like this vie against each other in such fashion, my first and only thought is to make sure I have popcorn. No matter who loses, it’s win-win for my soul.
Henry Bowman | Feb 23, 2011 | Reply
Private investment only seems to be about $500 Billion shorter than in 2007, Higgs. Nice frickin try. These companies have PLENTY of money; they’re just not using it properly. OR we could very well be in a balance-sheet recession like the one Richard Koo noticed happening in Japan throughout the 90s and early 2000s.
Brandon | Feb 24, 2011 | Reply
The 1979 Gulf of Campeche (Mexican portion of the Gulf of Mexico) Ixtoc oil spill in 1979, albeit in only 160 feet of water, was managed much less aggressively. Fewer dispersants, fewer booms, less beach cleanup and fewer pay to play jobs were involved in the Ixtoc clean-up.
At one point there were 14 inches of thick crude on the beaches of Padre Island. The Ixtoc volume was a bit less than the 200 gallons million spilled at the Horizon site. However, in 24 months, ultraviolet light rays, the hot Gulf of Mexico salt water, tropical storms, crude oil consuming microbes and evaporation had almost completely cleaned up that 140 million gallon, nine month Ixtoc oil spill….
Ever walk down the beach and see a big chunk of asphalt? That was someone’s very thick oil spill, 24 months earlier. Put another way, what happened to the hundreds of millions of gallons of crude oil and gasoline that came from all those tankers sunk by German U Boats off our Gulf and Atlantic coasts in 1941-1942. Answer: it was all gone within 24 months. Just like with the Ixtoc explosion and oil spill.
Wake up America! You are witnessing another Obama-Clinton pay to play scam! What did (the Clinton shadow government member) Rham Emmanuel say….”never waste a good crisis”
Forget the booms, the dispersants, the armada of shrimp boats, the skimmers and the daily press briefings. Let Mother Nature take her course and it will all be over in two years.
History repeats itself!
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George Meredith MD | Jul 11, 2011 | Reply
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Alfonso@ salt lake city lawyers | Sep 15, 2011 | Reply