Tag: Deepwater Horizon

Legally Insane: Trial Lawyers Abuse the System on the Gulf Coast

The American public does not hold attorneys in high esteem. For every one Ben Matlock, there are at least two Lionel Hutzes or Saul Goodmans.

And perhaps nowhere do real-life attorneys come as close to their pop-culture caricatures than in Louisiana. The bayou is a breeding ground for enterprising trial lawyers who don’t let facts get in the way of a multimillion dollar jackpot. Their nicknames say it all: “The King of Torts,” “The General” and, of course, “Alligator Mick.”

The tort bar feeding frenzy has now set its sights on BP, which has diligently made amends following the Deepwater Horizon oil spill three years ago. So far, BP has paid more than $10 billion to satisfy claims of individuals, businesses and government and more than $14 billion for clean up.

Nevertheless, there are those who want to abuse the system and collect money they don’t deserve. Due to an egregious misreading of BP’s agreement settling claims against it, businesses that were not harmed by the spill have rushed to empty the company’s pockets.

For example, one rice mill 40 miles from the cost earned more in 2010—the year of the spill—than it did in the previous years. It received $21 million from the settlement administrator under this absurd interpretation of the agreement.

An alligator farm received almost $17 million, a sum that assumes the company would have tripled its profits.

Even businesses that have a tenuous (at best) connection to the Gulf are getting a piece of the action. A car dealer 100 miles from the coast collected $1.45 million. A law office in central Louisiana made more in 2010 than it did in previous years; it still got $3.3 million for its “losses” as a result of the spill.

And the list goes on.

Considering that there are injured parties who actually deserve compensation, you might think there would be widespread outrage about bad actors cutting in line. You’d be wrong.

Says one Lousiana attorney in Businessweek recently (in the appropriately titled piece, “How BP Got Screwed on Gulf Oil Spill Claims”):

“This is Louisiana, after all,” says Danny Abel, a longtime New Orleans plaintiffs’ lawyer not involved in the case. “A big foreign company with deep pockets and you’re surprised there’s a feeding frenzy? Come on, man.”

That’s just not right.

BP is now going to court to rectify this situation and fix the injustice, and there’s more at stake than just the company’s bottom line. When individuals abuse our tort system, everyone loses.

Not only is it unfair to deserving victims, it also drags down our economy. Tort costs drag down our economy—to the tune of about 2 percent of GDP—and make our country less competitive, hurting manufacturers from Baton Rouge to Bar Harbor.

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In Oil Commission Report, Substituting Politics for Context

American Petroleum Institute, “API response to commission report: ‘We’ve made progress to improve safety’“:

API Upstream Director Erik Milito said the group is still in the process of reviewing the commission’s report but is pleased the commission is recommending increased funding for the federal agency responsible for inspecting and monitoring offshore activity. However, he said API is deeply concerned that the commission’s report casts doubt on an entire industry based on its study of a single incident.

“This does a great disservice to the thousands of men and women who work in the industry and have the highest personal and professional commitment to safety,” Milito said.

Dan Kish, Senior Vice President at the Institute for Energy Research, “IER: BP Spill Commission Was Flawed From the Start“:

This commission has had problems from the beginning – it has seemed to prioritize creating political cover for the Obama Administration over working towards becoming a fact-finding body. That’s because it’s full of politicians, activists and opponents of offshore drilling. The public needs to know that the Macondo spill was an isolated incident that tragically differed from the oil and gas industry’s history in the Gulf: 60 successful years that generated 50,000 successful wells.

Washington Examiner editorial, “Oil spill antidote: More federal bureaucracy“:

It wasn’t hard to predict the sort of recommendations to expect from the seven-member National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling when President Obama appointed Natural Resources Defense Council President Frances Beinecke, Union of Concerned Scientists board member Fran Ulmer and five other Democratic donors to the panel. All seven oppose offshore oil and gas activity and are environmental movement stalwarts. … (continue reading…)

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Be Careful in Raising Liability Cap on Deepwater Drilling

The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling today released its final report making numerous recommendations, including an increase in the current $75 million cap on liability for offshore drilling accidents. The oil spill dommission did not recommend a specific figure for the higher cap, leaving that decision up to Congress.

Manufacturers believe that a substantial or unlimited cap increase is not the solution. Before taking any action, Congress should take a close look at the impact of any cap increase on the industry. Any substantial increase to the liability limit will inevitably lead to higher insurance rates, making operations in the U.S. waters potentially so expensive as to drive producers out of the Gulf overseas. Smaller independent operators, in particular, would suffer competitively. (See this American Petroleum Institute paper, “Impacts of Increased Liability Limits on OCS Operations.”) The result would be to continue an unofficial moratorium on offshore drilling.

Last session, there were discussions of an unlimited liability, while several Senators introduced legislation to raise the cap 13-fold, to $10 billion. Despite intense pressure to act, Congress ultimately passed very little legislation last year in response to the Deepwater Horizon spill, largely out of concern about further damaging the Gulf region’s economy. Those concerns remain valid.

As the Manufacturers have stated before, any delay in off-shore drilling will have a significant economic impact on manufacturers and other industries throughout the Gulf Coast and the nation.  The nation cannot afford increased job loss, especially during a time when the unemployment rate is as high as 9.4 percent.  Additionally, any further delay will have considerable impact on the domestic oil supply where it will drive up the cost of energy and create uncertainty in oil supply because companies will have to go abroad for drilling.

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Gosh, The Wall Street Journal Sure is Good Today

In the world of smaller daily newspapers, Mondays and Saturdays always competed to produce the thinnest and dullest editions. Saturdays at least had the advantage of high school sports coverage to attract readers. Mondays offered a local business columnist or community round-up, a feature story to anchor the front page, and maybe dross spun into breaking-news gold by the weekend reporter.

The Wall Street Journal clearly runs on a different schedule, in a different news universe all together. The relatively new Saturday edition is more featurish than the other days, true, but it still has so much of interest, including long interviews like Kimberly Strassel’s talk with Ken Feinberg, the federal BP claims adminstrator, or, “Mr. Fairness.”

And Mondays, well, Mondays….!

All these stories and commentaries today are a good read.

Mark Whitehouse, “Some Firms Struggle to Hire Despite High Unemployment, “With a 9.5% jobless rate and some 15 million Americans looking for work, many employers are inundated with applicants. But a surprising number say they are getting an underwhelming response, and many are having trouble filling open positions.”

Michael P. Fleischer, “Why I’m Not Hiring,” a commentary from the president of Bogen Communications in Ramsey, N.J.: “A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government’s message is unmistakable: Creating a new job carries a punishing price.” (continue reading…)

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Interior Imposes Moratorium Without Economic Analysis

Attorneys for the Department of Interior will be in federal court in New Orleans Wednesday to argue for the dismissal of the suit by Hornbeck Offshore Services Inc. of Covington, La., challening the federal moratorium on deepwater drilling. (New Orleans Times-Picayune, “2 offshore drilling firms to argue the legality of Obama moratorium.”

We recommend this opening statement to Interior’s lawyers: “Your honor, we ask you to dismiss this lawsuit because it has become moot. Secretary of Interior Ken Salazar today ordered the lifting of the moratorium.”

Absent that smart choice, the legal question is whether Interior has the authority to issue a moratorium despite its failure to lay out solid, fact-based case for the action. The Administration has, in effect, embraced the “precautionary principle” — because there’s some slight, slight, slight, slight danger of another catastrophic spill, drillers must affirmatively prove that there is NO risk. And you can’t prove a negative.

U.S. District Court Judge Martin Feldman has previously ordered the lifting of the federal moratorium because of Interior’s ”arbitrary and capricious” case versus the economic harm the halt to drilling inflicted on the Gulf Coast.  But since then, the Administration has analyzed the economic impact and concluded the risks justify the effect on local economies and jobs. Right? There’s been an in-depth, serious analysis?

From “Meet the Press,” Sunday, August 8, David Gregory interview with White House energy and environmental advisor Carol Browner:

MR. GREGORY:  You talk about all the work here being done for safety.  Did the White House do any economic analysis about what a moratorium–what impact it would have on jobs in the Gulf Coast?

MS. BROWNER:  There is, there is an economic analysis being done.  It’ll be ready later…

MR. GREGORY:  But it was never done before the moratorium was put in place? Because those who are down there say, “You know what, the moratorium by the Obama administration is far worse than the spill itself.”

MS. BROWNER:  Here’s what we knew the minute the accident happened:  that if there was another accident of equal size, we didn’t have the equipment to respond.  All the boats, all the resources were being used.  We had a close–over 6,000 vessels, we embedded private citizens into this effort.  It was a massive undertaking, and if another accident were to occur, we would not have had the ability to respond.  And, you know, that formed a basis for putting a pause on drilling while we looked at the safety, while we looked at how we would contain it, ultimately, and then clean it up.

Well, since Interior needs an economic analysis, here’s a solid, even conservative one offered by Joseph R. Mason, the chairman of banking at the E.J. Ourso School of Business, Lousiana State University, at a Senate Small Business Committee on July 27, “The Deepwater Drilling Moratorium: A Second Economic Disaster for Small Businesses?

Mason:

These projections are lower than those presented by other studies because I estimate the period of new production loss to be only six months. However, if we were to extend the loss in new production in our model to the 18 months assumed by other sources, we would see a loss of 36,137 jobs nationally, 24,532 jobs lost in the Gulf region, and 14,156 jobs lost in Louisiana.

His study also examines the loss of earnings and state tax revenues.

Michael Bromwich, the head of the Bureau of Ocean Energy Management Regulation and Enforcement – formerly the Minerals Management Service — last week said the Administration might lift the moratorium early: “I think it’s everybody’s hope that we will feel comfortable enough that the moratorium can be lifted significantly in advance of Nov. 30.”

Wednesday, August 11, would be significantly in advance of Nov. 30.

Coverage …

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A Costly Moratorium on Jobs, Economic Activity, Energy Security

The American Energy Alliance on Monday released an analysis of the economic impact on the Obama Administration’s moratorium on deepwater drilling in the Gulf of Mexico. The findings:

  • Over 8,000 jobs lost in the Gulf Coast region
  • Over 12,000 jobs lost across the country.
  • $700 million in lost wages due to the moratorium.
  • $2.1 billion in economic activity lost in the Gulf Coast region and nearly $2.7 billion lost nationwide.

The analysis, “The Economic Cost of a Moratorium on Offshore Oil and Gas Exploration to the Gulf Region,” was conducted by Joseph Mason, the Louisiana Bankers Association endowed professor of banking at Louisiana State University. In the release, Mason commented:

The data are clear. The moratorium will cost the Gulf Coast region jobs, money, and economic development. In fact, the moratorium could be more costly, than the oil spill itself. The region is already struggling from devastating losses from Hurricane Katrina, Hurricane Gustav, and the nation’s depressed economy. By stifling one of the area’s primary economic engines, the administration is crippling the local economy and risking long term consequences.

Gulf Coast citizens will protest the moratorium on Wednesday in Lafayette, gathering at the Cajundome for the Rally for Economic Survival.

Mason appeared in a Bloomberg interview to discuss his finding, with the video at WashingtonPost.com here. (The Post and Bloomberg launched a new content-comingled business website this week. The Post’s business coverage had suffered after it dropped its weekday business section in March 2009.)

Nola.com, the Times-Picayune’s website, also provides an update on the litigation challenging the Interior Department’s moratorium:

Meanwhile, a lawsuit over the moratorium brought by Hornbeck Offshore Services Inc. of Covington continues.

Last week, a suit which represents the interests of shallow water drilling companies, Ensco Offshore Co. v. Interior Secretary Ken Salazar et al, was consolidated into the Hornbeck suit. Shallow water drillers believe that they face a de-facto moratorium because of the ban on deepwater oil exploration.

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Judge Blocks Drilling Moratorium as Ill-Founded, Capricious

U.S. District Court Judge Martin L.C. Feldman today blocked the Obama Administration’s moratorium on deep water drilling. His ruling is here. Excerpt:

The Deepwater Horizon oil spill is an unprecedented, sad, ugly and inhuman disaster. What seems clear is that the federal government has been pressed by what happened on the Deepwater Horizon into an otherwise sweeping confirmation that all Gulf deepwater drilling activities put us all in a universal threat of irreparable harm. While the implementation of regulations and a new culture of safety are supportable by the Report and the documents presented, the blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.

On the record now before the Court, the defendants have failed to cogently reflect the decision to issue a blanket, generic, indeed punitive, moratorium with the facts developed during the thirty-day review. The plaintiffs have established a likelihood of successfully showing that the Administration acted arbitrarily and capriciously in issuing the moratorium.

On May 28, the National Association of Manufacturers issued a statement from NAM President John Engler raising concerns about the overbroad moratorium.

(Hat tip: Michelle Malkin.)

UPDATE (4:40 p.m.): (Reuters) – A majority of Americans still support offshore drilling on the U.S. coastline despite the devastating oil spill in the Gulf of Mexico, according to a Reuters/Ipsos poll released on Tuesday.

UPDATE (4:50 p.m.): A statement from John Engler, president of the National Association of Manufacturers:

Today’s decision by Judge Feldman is appropriate and important for manufacturers and the entire supply chain. The moratorium immediately shut down 33 deepwater rigs in the Gulf of Mexico and cost thousands of men and women their jobs. Estimates show that the six-month moratorium would result in lost wages ranging from $165 million to $330 million and cost tens of thousands of additional jobs.

Manufacturers throughout the country who make and supply equipment, services, engines, boats and materials such as steel and concrete also would suffer massive economic consequences as a result of the President’s overly broad moratorium.

Today’s ruling is vital to our future energy independence and a step in the right direction for the health of the economy.

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Robert Samuelson: Energy Pipe Dreams

The Washington Post’s opinion columnist, Robert Samuelson, once again indulges himself in facts and reality in covering political rhetoric versus practical reality. Darn him, the dreamers curse.

From “Obama’s Energy Pipe Dreams“:

Just once, it would be nice if a president would level with Americans on energy. Barack Obama isn’t that president. His speech the other night was about political damage control — his own. It was full of misinformation and mythology. Obama held out a gleaming vision of an America that would convert to the “clean” energy of, presumably, wind, solar and biomass. It isn’t going to happen for many, many decades, if ever.

For starters, we won’t soon end our “addiction to fossil fuels.” Oil, coal and natural gas supply about 85 percent of America’s energy needs. The U.S. Energy Information Administration (EIA) expects energy consumption to grow only an average of 0.5 percent annually from 2008 to 2035, but that’s still a 14 percent cumulative increase. Fossil fuel usage would increase slightly in 2035 and its share would still account for 78 percent of the total.

Unless we shut down the economy, we need fossil fuels.

China is not taking the lead on “clean energy” technology, and the Presidents’ six-month moratorium on deepwater drilling isn’t justified, Samuelson further argues, again inconveniently using facts instead of wishful thinking to make his points.

Also cited, Robert Bryce’s new book, “Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.”

UPDATE Another op-ed columnist burdened with facts is Charles Krauthammer, and he, too, works on the leader as dreamer theme, “Barack Obama, Dreamer in Chief“:

“Part of the reason oil companies are drilling a mile beneath the surface of the ocean,” said Obama, is “because we’re running out of places to drill on land and in shallow water.”

Running out of places on land? What about the Arctic National Wildlife Refuge or the less-known National Petroleum Reserve — 23 million acres of Alaska’s North Slope, near the existing pipeline and designated nearly a century ago for petroleum development — that have been shut down by the federal government?

Running out of shallow-water sources? How about the Pacific Ocean, a not-inconsiderable body of water, and its vast U.S. coastline? That’s been off-limits to new drilling for three decades.

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Transition Away from Prosperity, 9 Million Jobs

From President Obama’s televised address last night:

Each of us has a part to play in a new future that will benefit all of us.  As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs -– but only if we accelerate that transition.  Only if we seize the moment.  And only if we rally together and act as one nation –- workers and entrepreneurs; scientists and citizens; the public and private sectors.  

Jonah Goldberg, National Review, “Oil: The Real Green Fuel“:

If you remove the argument over climate change from the equation (as even European governments are starting to do), one thing becomes incandescently clear: Fossil fuels have been one of the great boons both to humanity and the environment, allowing forests to regrow (now that we don’t use wood for heating fuel or grow fuel for horses anymore) and liberating billions from backbreaking toil. The great and permanent shortage is usable surface land and fresh water. The more land we use to produce energy, the less we have for vulnerable species, watersheds, agriculture, recreation, etc.

From the American Petroleum Institute, the summary of a paper released last November:

America’s Oil and Natural Gas Industry Supports Over 9 Million Jobs
Everyone is touched by America’s oil and natural gas industry. How so? Farmers use fertilizer made from natural gas. Truckers use diesel fuel to ship goods to market. And businesses rely on oil and natural gas to make and sell their products and provide their services. If you buy a loaf of bread, purchase a new electronic gadget, or drive a car, consider yourself a part of the oil and natural gas industry. From airline pilots to welders, and every job in between, we’ve all got a stake in our energy future.

The API paper is available here.

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A Drilling Moratorium, Killing Jobs

John Engler, president of the National Association of Manufacturers, has an op-ed in today’s Washington Times, “Drilling moratorium is a jobs moratorium“:

As economic woes continue to mount, the Obama administration now says it will work quickly to reopen some exploration and development of offshore oil and natural gas. Unfortunately, this is not enough. I believe our national priorities are the following: The oil spill in the Gulf of Mexico must be contained and the damage cur- tailed. The causes of the accident need to be understood and corrected so that future episodes can be prevented.

However, our country cannot afford to use this accident as an excuse for an overbroad moratorium that stops progress to the detriment of our economic and national security. We do not need to choose between energy security and environmental safety. We need to continue to strive for both.

The Wall Street Journal editorialized on the issue Wednesday, “A Second Oil Disaster: The deep water drilling moratorium threatens Gulf state economies.”

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