The explosion and spill from a BP deepwater drilling rig in the Gulf of Mexico has generated justifiable anger across the nation and especially in the affected coastal region. It’s also generated popular backlash, one manifestation of which is an increasingly loud call for confiscating company assets. The front line of this campaign is an ad hoc group, “Seize BP,” which organized anti-BP rallies in cities across America last week. The group’s mission is as simple as its name: Persuade the Obama administration to seize assets of the British-based oil company and use the proceeds for compensating victims and family members for loss of life, health, and property values. Such action, however, far from delivering justice, would make a bad situation worse.
Some basic background is in order. On April 20, the Deepwater Horizon, a floating oil and natural gas drilling platform located about 40 miles southeast off the Louisiana coast in U.S. territorial waters, exploded, killing 11 workers and injuring 17 others. Another 115 workers were rescued and survived without serious injury. After burning for well over a day, the Deepwater Horizon sank to the bottom of the sea, nearly a mile below, on the morning of April 22. The source of the problem, by all accounts, was the vessel’s wellhead blowout preventer. Apparently, the part was operative, but not fitted with remote-control or acoustically-activated emergency triggers. The Geneva, Switzerland-based Transocean Ltd. owned the rig; BP operated it under a lease effective through September 2013. Most of the crew worked for Transocean. At the time of the accident, another oil exploration company, Halliburton, was assembling production casing. Halliburton confirmed that it cemented the well some 20 hours before the explosion, but had not capped the cement plug because “operations had not reached a stage where a final plug was needed.”
Though the platform now lay on the Gulf floor, oil from the disconnected well continually has gushed to or near the water surface at an estimated rate of 12,000 to 19,000 barrels (500,000 to 800,000 U.S. gallons) a day. Due to oil toxicity and oxygen depletion, a major ecological disaster is in progress. Oil slicks to date have reached roughly 150 miles of Louisiana coastline alone, much of it seeping into marshlands. BP engineers and auxiliary workers under the command of U.S. Coast Guard Admiral Thad Allen are feverishly attempting to contain the damage by building anchored barriers, floating containment booms and sand barricades. BP also has sent down robots to the sunken rig to plug the leak, albeit with only limited success, through a series of complicated procedures. The fishing and tourism industries along the Louisiana, Mississippi, Alabama and Florida Gulf Coast, not to mention the habitat of hundreds of marine and bird species, are in jeopardy.
The administration, under enormous public pressure, has sprung into action. President Obama ordered a six-month moratorium on exploration at 33 deepwater (at least 500 feet below sea level) rigs in the Gulf of Mexico and a granting of new deepwater drilling permits in that body of water. His administration also has requested that the National Academy of Engineering conduct an independent probe into the causes of the disaster. Officials at the Interior Department and other federal agencies have vowed to increase oversight of drilling operations. And on Tuesday, Attorney General Eric Holder announced that the Justice Department is reviewing whether criminal and civil laws were broken. “We will make certain that those responsible clean up the mess they have made and restore or replace the natural resources lost or injured in this tragedy,” said Holder. This is apart from potential state lawsuits and the well over 100 private civil suits already filed.
Some people want far more than legal or administrative sanctions. They are demanding that the federal government effectively nationalize the company by confiscating its assets and placing them in a “temporary” trust fund. At the forefront of this movement is an organization calling itself Seize BP (www.SeizeBP.org). The group, an offshoot of an avowedly Marxist-Leninist organization, Act Now to Stop War and End Racism – better known as A.N.S.W.E.R. (or ANSWER) – is circulating an online petition whose content mirrors the group’s name. The petition reads: “The government of the United States must seize BP and freeze its assets, and place those funds in trust to begin providing immediate relief to the working people throughout the Gulf states whose jobs, communities, homes and businesses are being harmed or destroyed by the criminally negligent actions of the CEO, Board of Directors and senior management of BP.”
A.N.S.W.E.R. justifies its petition in a statement appearing on www.PSLweb.org (“the Party for Socialism and Liberation”) and couched in shrill, factually-challenged prose. Here’s a sample:
We must act now to defend jobs, communities, wildlife and the environment from the combined forces of BP, other Big Oil giants and the federal government that have acted as partners in the reckless and frantic search of corporate super-profits by permitting ultrahazardous deep-water, offshore oil drilling. BP reaped $5.6 billion in pure profits in the first three months of this year alone…
The U.S. government functions as a servant for the Big Oil capitalists, both at home and abroad. Our jobs, our loved ones, our communities and everyone’s environment are sacrificed in the government’s effort to serve BP and other Big Oil giants. Hundreds of thousands are killed and wounded for Big Oil. The people of Iraq and Iran, and elsewhere, have been subject to cruel invasions and occupations by the U.S. military and CIA so that BP and others can plunder their natural resources.
Supporters of confiscation argue that the Oil Pollution Act of 1990, which created a federal trust fund to make available up to $1 billion per incident, doesn’t adequately address the issue. Abolishing profit apparently will. “This is part of a deeper crisis of extracting resources for profit that we feel, and A.N.S.W.E.R. coalition feels, is not the way to extract resources for human use,” said Mike Chrisemer, an A.N.S.W.E.R. supporter and member of Florida State University’s Center for Participant Education. “We feel that the nonprofit way is the best solution to that. Leaving it up to companies that are just trying to make money off it – that doesn’t always equate for what’s best for the community.” Leaders of Seize BP aren’t impressed by company CEO Tony Hayward’s recent assurances that BP is committed to meeting its responsibilities and making good on all claims. “Our demand is very straightforward and very simple: Seize assets of BP sufficient to compensate the people they harm,” states Seize BP chief organizer Carl Messineo.
Sources more reputable than A.N.S.W.E.R./Seize BP also are pushing this envelope. Robert Reich, Secretary of Labor during the first Clinton administration and now a professor of public policy at the University of California at Berkeley, argued in the May 31 edition of the Huffington Post that because we have a national emergency on our hands, the federal government must temporarily seize BP assets. Without such action, full corporate accountability is impossible. The piece is worth quoting at length. Reich noted:
It’s time for the federal government to put BP under temporary receivership, which gives government authority to take over BP’s operations in the Gulf of Mexico until the gusher is stopped. This is the only way the public will know what’s going on, be confident enough resources are being put to stopping the gusher, ensure BP’s strategy is correct, know the government has enough clout to force BP to use a different one if necessary, and be sure the president is ultimately in charge.
If the government can take over giant global insurer AIG and the auto giant General Motors and replace their CEOs in order to keep them financially solvent, it should be able to put BP’s North American operations into temporary receivership in order to stop one of the worst environmental disasters in U.S. history.
The Obama administration keeps saying BP is in charge because BP has the equipment and expertise necessary to do what’s necessary. But under temporary receivership, BP would continue to have the equipment and expertise. The only difference: the firm would be unambiguously working in the public’s interest. As it is now, BP continues to be responsible primarily to its shareholders, not to the American public. As a result, the public continues to worry that a private for-profit corporation is responsible for stopping a public tragedy.
Such statements suggest a desire for nationalization not simply of BP, but of the entire oil industry. Indeed, in light of Reich’s favorable view of the federal takeover of AIG and GM, it’s fair to say he wouldn’t be too troubled by a takeover of all U.S. industry. For him, the pursuit of profit is inimical to the public interest. But for most of us, the prospect of seizure should be alarming. There are several reasons why.
First, BP is a foreign-owned company and thus by international law is immune to seizure. “Seize BP” activists say a legal precedent exists for receivership because the assets pose a domestic threat. But this principle only applies when there is a real possibility that assets will be transferred out of the country. “Most of BP’s assets in the U.S. are not mobile,” states Cornell law professor Jeffrey Rachlinski. “They’re not exactly a shell corporation. It’s not going to be difficult to enforce judgment against them and any judgment is likely to be extensive.”
Second, a government takeover would be a foreign policy blunder of immense proportions. Great Britain has been a trusted ally for more than a century. Seizing one of their largest corporations, and at a time when their own economy is reeling, would sour our partnership quickly. It also would set a dangerous precedent for U.S. relations with other nations. Under a similar pretext, for example, we could seize assets of (Japanese-owned) Toyota to compensate American victims of that carmaker’s malfunctioning accelerator pedals. And we could take over Chinese toy factories to compensate American children and their families injured by design defects, excessive lead paint and tiny magnets in their merchandise. Putting the shoe on the other foot, any number of foreign governments, with or without justification, could expropriate U.S. corporate assets in the manner of Cuba’s Castro regime.
Third, nationalization doesn’t assure safety. A good example is the anti-American regime of Venezuela, the world’s fifth-largest oil exporter. In 2007 its State-run oil and natural gas company, Petroleos de Venezuela (PDVSA), grabbed a 60 percent stake in four projects that process crude oil extracted from the South American country’s Orinoco River basin into synthetic oil. The affected companies were ExxonMobil, Chevron, ConocoPhillips, BP, Total SA (France) and Statoil ASA (Norway). “This is the true nationalization of our natural resources,” boasted President Hugo Chavez. “The privatization of oil is over. This is the last space that was left for us to recuperate. Petroleum now belongs to all Venezuelans.” Not everyone in the far-Left strongman’s country has been celebrating. Just last month PDVSA had a major accident of its own. One of its offshore gas exploration platforms, the Aban Pearl, sunk into the sea. The accident didn’t generate headlines mainly because all 95 workers aboard were rescued. But it might have been avoided altogether had Chavez not fired half of PDVSA’s managers and senior engineers following a 2002 strike. That hasn’t been the only calamity. In 2005 an explosion killed five workers at PDVSA’s Paraguana Refining Complex. What makes us think a U.S. government takeover of BP will immunize us?
Fourth, if BP hasn’t been able to cap its own well, it’s highly unlikely that federal bureaucrats and contractors will do any better. BP has every interest in fixing the problem. Its reputation, indeed existence, is on the line. Already, the spill has cost the company about $1 billion in losses and may eventually cost anywhere from $3 billion to $30 billion. BP had the expertise to build the well and drilling technology; BP, by definition, has the expertise to plug the rupture.
Fifth, BP, a publicly-traded firm formed through a 1998 merger of British Petroleum and Amoco, has been hammered by the market in which it operates. The company’s inability to prevent or control a calamity, in other words, is a good predictor of its potential lack of profitability. That’s why investors have been pulling out. BP’s stock price, hovering around $60 a share in the days before the April 20 explosion, closed last Friday at $37.16, a drop of around 40 percent. And two bond rating firms, Fitch and Moody’s, downgraded the company’s long-term debt last Thursday. The prospect of a financial meltdown – or barring that, a takeover by another company – is ample incentive for BP to get its problem under control.
Sixth, the “Seize BP” campaign is about building socialism, not providing financial compensation. For organizers, the BP fiasco is the ugly face of capitalism and not a mere accident. They seek receivership as a first step. That the campaign is controlled by A.N.S.W.E.R. is highly significant. Founded just three days after the 9/11 terrorist attacks, A.N.S.W.E.R. during the last decade organized several major antiwar rallies whose dominant theme was opposition to U.S. interests rather than to a particular U.S. policy (see pdf of NLPC Special Report). In beliefs and leadership, the New York City-based group is virtually indistinguishable from the International Action Center (IAC), a front for a Communist entity known as the Workers World Party; former U.S. Attorney General Ramsey Clark is closely involved with all three groups. In 2006, National Legal and Policy Center published a Special Report that I had authored describing in detail how these and allied organizations operate and why organized labor in particular has become part of their orbit. “Seize BP” front man Carl Messineo fits right in here. He’s a co-founder of the Partnership for Civil Justice Legal Defense & Education Fund, a project of the IAC. He also was a member of the legal defense team for the antiwar group Voices in the Wilderness, which eventually was fined $20,000 by the Treasury Department for smuggling supplies to Iraq in violation of UN sanctions against the then-Saddam Hussein regime.
Imposing receivership upon BP, a company with nearly $250 billion in revenues in 2009, will not provide accountability for the Gulf Coast oil spill. Nobody is ignoring the paramount importance of safety or the necessity of fully compensating aggrieved parties for all personal and property damage. A society that values property rights should not give any liable party a free pass. But a hostile federal takeover would send a message to every firm in the oil industry that their assets aren’t safe from plunder.