Tuesday, June 22, 2010

Deepwater Horizon

I’m not an engineer, my knowledge of the complexities of off-shore drilling is best described as miniscule and all in all I’m the last person you should ask if you want an explanation of what’s going on in the Gulf of Mexico (if you’re looking for that, try here).  But I am a lawyer, of sorts, and some of the actions of the US Government in response to the Macondo spill have raised eyebrows to say the least.
The spill has taken place on a rig in US sovereign waters, in which BP have a license to drill.  The rig on which the drilling took place was owned and operated by Transocean, and built by a variety of subcontractors including Halliburton.  The immediate cause of the disaster seems to have been the failure of the blow-out preventer – manufactured by Cameron and owned by Transocean.  The well itself was cemented and cased by Halliburton.  Presumably all of the above contractors and operators will have been operating in compliance with a best practice procedure laid down by BP.
So, we have a failure in three structures – the casing, the BOP and the drilling-ship – none of which were owned or operated  by BP, but all of which might (or might not) be the result of poor practice by BP.  Now, I’ve done a bit of insurance work, and the first question that gets asked (after ‘what happened?’) is ‘who was responsible for x?’  In the situation above, I’d have thought that was debatable to say the least – certainly one would expect the answer to come about only after months of wrangling and litigation.  And yet in this case, the President of the United States was on air saying that the whole thing was the responsibility of BP.  Is it?  Well, maybe – but don’t we have little things like the rule of law to prevent Governments arbitrarily applying multi-billion dollar liabilities on companies for reasons of political expediency?
Then, if this rush to judgement was not worrying enough, we had the Federal Government determining that all drilling in the Gulf should be suspended (on the apparent basis of an experts’ report that did not recommend such a suspension).  Well, fine, it’s the prerogative of all Governments to over-react in stupid, damaging ways.  What’s less good is for that Government then to demand (on the basis of what legislation?) that BP pick up the salaries of people laid off by companies as a result of the decision of the Government to close drilling.  As the Daily Caller says:
It’s unclear whether BP faces any legal responsibility to pay the salaries of workers laid off directly because of a regulatory decision by the federal government.
Well quite.  On the whole I’d agree it’s better from a commercial perspective when Governments don’t make up the rules of contract as they go along.  Add to this the demand that BP pay $20bn into a slush fund, I mean an escrow account, so that a Democrat flunky can siphon it off to pay off an angry electorate, and you’re starting to get a picture of a US administration response based on knee-jerk emotionalist populism.
We’ll brush aside the anti-British angle, as apart from the usual elected morons and know-nothings (a feature of politics on both sides of the Atlantic sadly) I don’t really think that there is a deliberate policy of Brit-bashing (just the utter indifference to relations with allies that is such a feature of Obama’s foreign policy).  But even without overt anti-Britishness, a combination of populist nonsense and emotive idiocy is not encouraging.


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