May 12, 2010
10 Critical Facts about BP and the Gulf of Mexico Crisis
- On May 10, BP said it had already spent $350 million as a result of the Deepwater Horizon accident.
- By contrast, in the first three months of this year, BP made $93 million per day in pure profits. This does not include the huge salaries and perks of its executives that are considered “costs,” not profits. Thus, BP has spent what might seem to many people to be a big number on the accident ($350 million) but it is only equivalent to 4 days of pure profits for BP.
- BP has a market value (BP’s assets) of $152.6 billion.
- So far, BP has only paid 295 claims out of the 4,700 claims made against the company for damages and losses incurred from the Deepwater accident.
- JP Morgan Chase Bank owns almost 30 percent of BP’s common stock.
- BP is the largest producer of offshore oil drilling in the Gulf of Mexico.
- Citigroup analysts have formally advised investors not to worry too much about “the likely costs to the company [BP].” The Citigroup analysis notes that punitive damages against Exxon for the Exxon-Valedz oil spill in 1989 were originally set by the courts at $5 billion but reduced by 90 percent when the case reached the Supreme Court in 2008. The total cost to Exxon was $500 million in compensation damages and $500 million in punitive damages. The total cost imposed on Exxon after 20 years of litigation amounted to only $1 billion, or the equivalent of just 12 days worth of BP’s pure profits ($93 million per day) in the first three months of this year. Because of the Oil Pollution Act of 1990, BP and any other oil company that is responsible for an offshore oil accident is not legally required to pay more than $75 million in damages above the oil recovery costs. Thus, the government’s response to the Exxon Valdez accident was to actually protect the Oil Giants by limiting their liability and risk exposure in the event of a catastrophic accident. Again, the $75 million limit is less than 1 day of BP’s pure profits in 2010.
- BP is using carefully crafted language to imply that it may cover all the “legitimate” costs and “legitimate” damages (and they would presumably be the entity to determine which claim is legitimate) and that this amount will surpass the damage cap of $75 million set by the Oil Pollution Act. States BP’s executive vice president David Nagel, “A $75 million liability is not where our head is at this moment.” The most important three words of Nagel’s quote is “at this moment.” The law, as written, entitles BP’s executives to be the deciders of whether to pay or not to pay any damages above the $75 million cap. Right now the company is under the glare of global publicity and it can say whatever it wants to suggest that it is taking full responsibility.
- BP has a long history of safety violations and reckless behavior. They chose not to equip Deepwater Horizon with an acoustic trigger, a last-resort option that could have been activated from a remote location triggering the well to shut down even if it was damaged badly. This piece of equipment is required in several countries, but not in the United States. Though BP does employ them on their rigs offshore in England, they choose not to in the Gulf of Mexico. This piece of equipment costs $500,000 – an amount they make in pure profits in less than 8 minutes (based on 2010 earnings). BP also chose not to install a deep-water valve, which could have served as another last-resort option for cutoff. BP has been fined many times by the Occupations Safety and Health Administration (OSHA), and is the recipient of their largest fine ever. OSHA Deputy Assistant Secretary of Labor Jordan Barab has this to say about BP: “BP has systemic safety and health problems.”
- Unless there is an asset seizure and the placement of those funds in a trust to provide for full compensation and relief for the harmed people and the damaged environment, BP and its executives will avoid real responsibility to remedy the suffering and damage caused by their reckless and greedy search for super-profits. In fact, if BP and Big Oil is left untouched by government intervention the whole Deepwater catastrophe could turn out to be a source of more profits for Big Oil. A Citigroup analyst report states: “Reaction to the Gulf of Mexico oil leak is a buying opportunity.”