As the Gulf oil leak continues to spew, albeit at a slightly lower rate now, and the American public is becoming resigned to the dreadful spectacle of continued damage to wildlife and coastlines, BP continues to act as a law unto itself. Not that that should be any surprise; the oil producer clearly believed from the onset of the crisis that its status as America’s biggest oil and gas producer made it too big to push around. Recall this stunning remark from BP’s chairman:
The US is a big and important market for BP, and BP is also a big and important company for the US, with its contribution to drilling and oil and gas production. So the position goes both ways.
This is not the first time something has gone wrong in this industry, but the industry has moved on.
Despite the threat of an criminal indictment hanging over its head, the company continues to insist on paying a normal quarterly dividend over vociferous objections by Obama and many senators. Now estimates of likely damage vary; earlier they ranged from $10 to $60 billion; more recent forecasts seem to top out at $35 billion. For a company to sacrifice one year of dividends would whack its stock short term but hardly be fatal. And BP is likely looking at the Exxon Valdez record of initial damage awards being delayed and cut back considerably, as well as the fact that Obama has never followed through on tough talk. Par for the course is that the head of the NOAA appears to be taking up BP party line, insisting that the sighting of underwater oil plumes are “anomalies” (even if there was uncertainty on this matter despite a considerable number of sightings, a more honest answer would have been something like “we’ve seen evidence of them, but we aren’t certain whether these are a meaningful phenomenon. We are continuing to investigate”).
Some readers will defend BP, arguing that until the extent of the damage is known, there is no point setting aside reserves, particularly for a company that throws off so much cash and is less levered than most in its industry. However, most companies, like banks and retailers DO set aside reserves at the time a loan or sale is made, and they are supposed to increase them if loss levels rise higher than what they had forecast (we’ve noted that banks have been playing fast and loose on this one). And BP could have taken the same action yet made a more conciliatory stance (“Look, we don’t have a good handle on the losses yet. We are confident we can handle a worst-case scenario. We don’t want to overreact now; we’ll revisit this topic next quarter”). They might even argue that BP is doing everything it can. That is patently untrue. We’ve pointed out examples, and are sure readers can come up with others: the refusal to allow cleanup workers to wear respirators (it took an indictment), the failure to reimburse Gulf towns for cleanup costs (I heard two stories when I was in Alabama from people who have weekend homes on the coast), and the fact that most of the oil could have been kept from hitting the sho. I keep pointing to this post from Fishgrease at Daily Kos precisely because I think everyone needs to read it:
…if fucking proper fucking booming is done properly, you can remove most, by far most of the oil from a shoreline and you can do it day after day, week after week, month after month. You can prevent most, by far most of the shoreline from ever being touched by more than a few transient molecules of oil. Done fucking properly, a week after the oil stops coming ashore, no one, man nor beast, can ever tell there has been oil anywhere near that shoreline.,,,
I couldn’t find any pics of fucking proper fucking booming from along the Gulf, because there aren’t any.
Yves here. Fishgrease explained that the liberal use of “fuck” or equivalent is essential for successful booming.
Fishgrease also points out in his Booming School II post that the Coast Guard, which has done an utterly incompetent job of booming, is touting BP’s performance, perhaps to hide its own abject failure (from the first and second post):
Now the Coast Guard? They know booming. They know what fucking proper fucking booming looks like. Coast Guard commandant, Adm. Thad Allen should be fired. Today. Now. This minute. Before he can give another press conference echoing what BP said not five minutes before him. Then he should be fucking court-martialed and fucking sent to prison before BP can give him a goddamned fucking job. He’s a shameless piece of shit…
Maybe fucking Coast Guard commandant, Adm. Thad Allen had no idea of what was going on with Governor Jindal because fucking Coast Guard commandant, Adm. Thad Allen was spending all his time reading BP-written talking points to the fucking media.
“Several, several options are being exhausted here,” said Adm. Thad Allen, commandant of the U.S. Coast Guard. “We have engineers that are on scene in Houston with British Petroleum.”
Obama. FIRE HIM! FIRE HIM OR FUCK YOU!
Obama needs to decapitate the USCG immediately, put a hard ass in charge, and then personally tell BP that the United States of America is not going to be pushed around by some half-assed self-important British corporation.
BP seems much more serious about image control than it is about booming and other things that might reduce damage. From Jacqueline Leo (hat tip Francois T):
According to the news blog Powering a Nation, BP had workers sign a contract that included a gag order, preventing them from talking to the media. Even as the birds lay dying in a sea of mud and oil, BP has tweeted, claiming that the company and the U.S. Coast Guard have not muzzled their workers. But according to the blog, there was a clause “prohibiting them and their deckhands from making ‘news releases, marketing presentations, or any other public statements’ while working on the cleanup.”
Even more important, BP is using paid search to influence public opinion as people look for information about the oil spill and its consequences. Just Google any of the common search terms related to the disaster and what pops up first? BP. Since this catastrophe is one of the hot search topics of the year, you can imagine what BP is paying for the privilege of elbowing out other news and opinion sites that would normally buy at least one of these terms. But money talks–and oil money, as slippery as it may be, talks louder than most.
According to Scott Slatin, who runs a New York-based search marketing company, “While we have seen corporations use search-engine marketing to sway opinions, most recently in the health-care debate, it is always under the cover of a non-profit or lobbying organization. This is the first time I have seen a company use this tactic on such a wide scale. And it is very effective, because BP gets its message, ‘Learn more about how BP is helping’ atop almost every Google search permutation related to the spill, and effectively blocks non-profits (with much smaller pockets) from getting their message across.”
Yves here. BP may have been too clever by half. It’s one thing to lie to the press about putting a gag order on your employees; quite another to lie to Uncle Sam. The most obvious smoking gun is BP insistence that the leak was only 5,000 barrels a day. If prosecutors decide to investigate BP’s coverups, and the trail leads to the executive suite, it could do even more damage to BP than the environmental losses.
The media may be unwittingly doing BP a favor by focusing its ire on CEO Tony Hayward’s offensive statements. It succeeds in personalizing the problem, when the chairman’s remarks and the company’s priorities indicate that Hayward’s attitude is broadly shared within BP. He may be an outlier only in his artless candor.
Unfortunately, the odds are that BP will get off far more lightly than most Americans think it deserves, and in particular, will not pay the full cost of the environmental damage. The only thing that could change the calculus is if the Democrats take large midterm losses (and the fact that the economy is stalling, contrary to optimists’ expectations, makes that more likely). If Obama suddenly believes his re-election is imperiled (many Democrats seem to believe he is protected by the lack of credible Republican candidates), he may suddenly develop a backbone. Taking a hard line (and for a change, following through) with a near universally hated company is a political no brainer. And although I am no legal expert, criminal action would seem to open up the possibility of cancellation of oil leases.
Despite BP’s brazenness, it could be simultaneously preparing itself for worst case options. Some investors see a breakup, takeover, or bankruptcy filing as a real possibility. From the Globe and Mail:
A few weeks ago, when BP was relatively confident it could stem the flow, there was little sense that BP faced anything more than a very expensive cleanup bill. While some still think that’s the case, others say the company’s breakup, takeover by a rival energy heavyweight, or bankruptcy in whole or in part is probable, if not certain. “BP could be facing the death penalty in the U.S.,” said energy analyst John Kilduff, of New York hedge fund Round Earth Capital. “The viability of the company is definitely in question.”
Another high-profile analyst agrees. Dougie Youngson of London’s Arbuthnot Securities said investors who think BP’s selloff is overdone could be gravely mistaken. The company has “the real smell of death,” he said a few days ago.
The reports on the move to segregate the oil spill operations from a managerial standpoint (it’s conceivable that each major production operation is a separate legal entity) may be a precursor to a “good company/bad company” split. From the Guardian:
BP is to hive off its Gulf of Mexico oil spill operation to a separate in-house business to be run by an American in a bid to isolate the “toxic” side of the company and dilute some of the anti-British feeling aimed at chief executive Tony Hayward, the company said today.
Yves here. If the Guardian has this right, BP could be in the process of trying to maneuver to keep US claimants from getting access to the full resources of the company to pay reparations in the Gulf. This could get nasty indeed.