Rich Cooper

Aug 3, 2010

First off, let me state for the record that I am not taking a page out of the Rep. Joe Barton (R-TX) book of apologies. I may have said some humdingers in the past, but I am not about to apologize to BP for events for which they are ultimately responsible.

That leads me to my second point. BP’s leadership (former and current) have publicly declared in every way imaginable that they will pay for the Gulf oil spill clean up and “make things right” for the people, businesses and environment impacted by what can only be described as a national nightmare. I take them at their word.  

No company in the world has a worse brand image than BP, and the only way to restore the name and brand’s integrity is to literally do everything imaginable and unimaginable to make things right. BP’s new leadership, Robert Dudley, has made that pledge, and I also take him at his word.

With these two statements as a backdrop, every business leader in America, large or small, should be scared out of their mind at the actions of the U.S. House of Representatives this past week.

With a vote of 209 members for and 193 against, the . While at first glance there may be reason to cheer our elected leaders for putting the screws to fat cat oil companies with monstrous profits and excessive salaries to make them pay for the mess they caused, these actions play right into the hands of people who are not necessarily our friends.

By eliminating the liability cap, small to mid-size oil companies (and yes there are small to mid-size oil companies) will find themselves operating in an area where they can no longer afford to do business. The costs and exposed risk is too high, and as a result, they will either have to close down or be bought up by other companies to do business. Even successful, large-scale companies may find these conditions perilous.

For as much as we may want to make sure that BP and others like them pay for their messes, imposing post-disaster reactionary measures without looking at the short and long-term consequences is almost as dangerous.

By no means am I am an apologist for oil or insurance industries, but the actions of the House this past week display a punitive, knee-jerk reaction to a very complex disaster that deserves a deeper breath of analysis by Congress and the Administration before any final decisions are made.  

In a June 9 hearing before the House Transportation & Infrastructure Committee, industry experts and representatives of the insurance industry warned that with raised caps or no liability caps at all, petroleum industry members could be uninsurable. They additionally warned of the reinsurance pressures that would be required if such a scenario were to play out, as the existing insurance industry could not adequately cover the exposed liability. These experts also warned that the only oil industry operations that could possibly operate in these conditions and cover such exposed risks would be those oil companies entirely backed by nation states.  

Under this scenario, it means the only companies our nation could depend on for oil would be companies owned and operated by the Kingdom of Saudi Arabia and Hugo Chavez’s Venezuela.  

While the Saudi Kingdom may technically be a U.S. ally, they are not one of the first nations I think we can depend on when things get dicey. Furthermore, having American interests held captive by Aramco, the Saudi-owned and largest oil company in the world and Citgo, the Venezuela-owned company, is in no one’s national security interests.

For all of the warm fuzzies that Joe Kennedy’s TV ads may put on our TV screens, I think the anti-American, megalomania rants of Venezuela’s dictator, Hugo Chavez, are testament enough that he doesn’t care one bit about our oil needs or paying for any mess Citgo might be involved with in the future.

The House’s reactions are another classic move by Congress following a disaster of imposing sweeping and far-reaching decisions without examining the strategic implications of their legislated moves. Despite the counsel of hearing witnesses and others, House members (wanting to show the good people of their Districts that they are responsive and are on top of things by tarring and feathering the boogie men of the moment) have proven again that they have earned the full rights and privileges of their dismal approval ratings.  

I want BP to pay for their mess. I also want other companies, governments and organizations that are at similar fault for future incidents to be held accountable for their screw-ups. But in a society that is already over-litigious to where we sue over spilled hot coffee and the emotional distress caused by certain paint colors, the House’s measures cause potentially greater peril than the original disaster.  

Putting American companies and workers out of business because the risk can’t be adequately covered while leaving our energy needs beholden to people who don’t have our interests at heart is not a strategic solution. More thought, innovation and leadership are required to address these very complex problems, but those traits have been missing in Congress for a while now. With any luck, the Senate and future Congresses will provide those for us.

This piece was originally posted on Security Debrief.


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