Putting A Price On BP's Responsibility To Gulf

BP agreed to put $20 billion into an escrow fund to pay the claims of Gulf residents hurt by the leak. When BP CEO Tony Hayward faced a panel on Capitol Hill Thursday, Rep. Joe Barton (R-TX) called the deal a "$20 billion shakedown" of the oil company. But many others demand far more compensation from BP.

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TONY COX, host:

This is TALK OF THE NATION. I'm Tony Cox, in Washington. Neal Conan is away.

BP's CEO Tony Hayward was grilled today in front of a panel of angry Capitol Hill lawmakers as he issued his latest apology for the oil disaster in the Gulf of Mexico and promised that BP will make things right.

Mr. TONY HAYWARD (CEO, BP): We will pay all legitimate claims for losses and damages caused by the spill. Those are not just words. We've already paid out more than $95 million, and we've announced an independent claims facility, headed by Ken Feinberg, to ensure the process is as fair, transparent and rapid as possible.

COX: But in a clear departure from much of the rhetoric about BP's response, Congressman Joe Barton of Texas blasted Hayward's reparations agreement with the White House with an apology of his own.

Representative JOE BARTON (Republican, Texas): I'm ashamed of what happened in the White House yesterday. I think it is a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown, in this case a $20 billion shakedown.

COX: That $20 billion came out of yesterday's White House meeting between President Obama and BP officials, who agreed to put the money into an escrow fund to pay the claims of Gulf residents hurt by the leak.

But questions remain whether this will satisfy a still-skeptical public or the people affected along the Gulf Coast. It isn't clear yet, for example, who will get paid, how much and when, which are additional questions to be sorted out.

Tell us: What would BP have to do to satisfy you? We especially want to hear from those individuals whose livelihoods are directly affected by the spill. Our number here in Washington is 800-989-8255. Our email address is talk@npr.org. And you can join the conversation at our website. Just go to npr.org, and click on TALK OF THE NATION.

Joining us now from NPR's booth at the White House is national political correspondent Mara Liasson. Mara, welcome.

MARA LIASSON: Glad to be here.

COX: It's been kind of busy up on the Hill today, I would imagine.

LIASSON: It has.

COX: Would you say that we have learned anything new from the hearings so far today, or is this primarily political theater? Maybe a little of both?

LIASSON: Well, it's a little of both. I think it's a lot of political theater. This was kind of this - when a corporation commits the kind of damage that BP did, they can expect to be subject to the kind of laceration that BP's CEO Tony Hayward got today.

I think that we didn't necessarily learn anything new. BP is clearly trying to send a message of contrition and responsibility and accountability, just like the chairman of the board did yesterday at the White House, that they're going to pay every claim and they're going to restore the Gulf.

Of course, Joe Barton really gave the president and the Democrats a big, gift-wrapped present today. He kind of fulfilled every stereotype of Republicans being in the pocket of big oil. And ever since then, the White House has been demanding that other Republicans repudiate his remarks, and they have been, by the dozens - starting with the minority leader in the House, John Boehner.

COX: A number of people have been talking on the Hill about not just Barton, but about this - about BP and what they did, what they didn't do. For example, we have Henry Waxman on tape. Here he is.

Representative HENRY WAXMAN (Democrat, California): I'm just amazed at this testimony. Mr. Hayward, you're not taking responsibility. You're kicking the can down the road and acting as if you have nothing to do with this company and nothing to do with the decisions. I find that - I find that irresponsible.

COX: So it makes it hard, Mara, does it not, to sort of figure out who's telling the truth. You have the chairman, the CEO of BP, saying we're going to pay and we're going to do everything that we need to do. And then we have people like Waxman saying, look. You're not even doing the little bit you were supposed to have been doing.

LIASSON: Well, what Waxman's talking about is that they're not taking responsibility for what went wrong that caused the explosion. The safety record of BP was horrendous, and it was detailed at the hearing today how many safety violations they had, how much worse they were than other oil companies.

Look, BP is under investigation by the Justice Department. It's going to be paying a tremendous number of claims, not just for people who had economic damage from the spill, but also for violating all sorts of environmental rules and other regulations.

So I think both of those things can be true at the same time. We still might not have a completely clear picture of exactly what went wrong, how much of it was BP's fault, how much of it was the government's fault for not forcing BP to actually come up with safety plans and demonstrate it could actually perform them.

So there's been a lot of damning information that's come out at the hearings. But at the same time, you've got what's happening at the White House, which is kind of my bailiwick, where the president is moving to try to actually enact a plan, to show that the government can do something to help people down there.

COX: Now, I know that you're at the White House and not at the hearings themselves, but there is another clip I'd like to play for you and get you to analyze it for us. It's an exchange between longtime Energy and Commerce Chairman John Dingle, a Democrat from Michigan, and BP CEO Tony Hayward.

Representative JOHN DINGLE (Democrat, Michigan; Chairman, Energy and Commerce Committee): Can you tell us under oath that the decision to use six centralizers instead of the recommended 21 was not made to save time and money?

Mr. HAYWARD: I was not involved in that decision. So it's impossible for me to answer that question.

Rep. DINGLE: All right. Can you tell us how much money BP saved by not using the proper number of centralizers?

Mr. HAYWARD: I'm afraid I can't recall that.

Rep. DINGLE: Would you submit that for the record? How much time was saved?

Mr. HAYWARD: And I don't recall that, either, I'm afraid.

Rep. DINGLE: Please submit that for the record.

COX: So Mara, one last thing. It seems that all of this boils down to an issue of credibility. Obviously, the president's credibility is on the line with how he is or is not dealing with this. BP's credibility is on the line. And now you have members of Congress trying to jump into the fray to establish their own credibility, which makes it, I suppose to a certain extent, a little confusing for us to follow.

LIASSON: Well, it's confusing, but I think the American people have a pretty clear idea of who's the villain here. I mean, BP - Tony Hayward couldn't say anything specific about the basic charge against the company, which is that BP cut corners, and they did things that were unsafe because they wanted to save time and money when they were drilling this well.

And I think that's the indictment. That's the bill of particulars that's being built bit by bit by people like John Dingle, who is an expert at this kind of a congressional investigation, how you kind of build a case.

And then investigators at the Justice Department are going to decide how to weave it into some kind of a criminal investigation. But I think that the picture on the part of the people isn't confused. I think it's pretty clear. I think they feel that BP was an irresponsible company, period.

COX: Mara, thank you very much.

LIASSON: Thank you.

COX: Mara Liasson is NPR's national political correspondent, joining us today from her White House office.

Now, joining us from a studio in Newton, Massachusetts is Zygmunt Plater. He was the chairman of the State of Alaska Oil Spill Commission's Legal Task Force - that's a mouthful - over a two-year period after the wreck of the Exxon Valdez. He wrote a commentary for the Room for Debate blog on the New York Times website. Welcome to the program, sir.

Professor ZYGMUNT PLATER (Boston College Law School): Thank you. It's good to be here.

COX: In your commentary, you talk about your work on the Exxon Valdez spill 20 years ago and the payout, which you say missed 90 percent of the hard-to-monetize injuries. So let's break that down so that we understand exactly what you are saying, what you meant, and so that we can follow you.

Prof. PLATER: Well, first of all, our commission did not do - come up with that percentage. We had a number of recommendations. We determined a good deal about the causation, determined that it wasn't a question of the captain having drinks. It was a culture - a corporate culture of, as we said, complacency, collusion and neglect by Alyeska, the management company which was, by the way, run by BP.

But the subsequent payout by Exxon, it's not exactly how much they paid. It's probably a little bit beyond $4 billion, between four and $5 billion. But when you talk to people in Alaska now or then, 10 years afterwards, they would say the money that was paid out was really very insufficient to take care of the life of the communities, which in many cases had really been crushed, that natural systems and ecosystem services, which had been destroyed - and so, you know, this is hard to estimate, but I've heard again and again, you know, 10 percent maybe is what Exxon paid out of what we really lost. And that is sobering, and it's likely to be similarly difficult to get the full grasp on prices in the Gulf.

COX: One of the things that you write about, and I'd like to get you to explain this, as well, is something called the reopener provisions, which you say stem from the oil spill at Exxon Valdez, and it has particular importance to what is occurring in the Gulf right now. What is that?

Prof. PLATER: Well, it's interesting. In that case, it was criminal. And reopeners are used in other areas of law, but I think this is the first time there was such a reopener in an environmental catastrophe.

There was a criminal settlement with the governments for $900 million in criminal restitution. There were also some criminal penalties. And remember, no one died in Alaska. So there were no manslaughter penalties. So, $900 million. But we knew that it was not foreseeable what the consequences would be of a spill of that magnitude in an environment which was sensitive, but not fully known.

So the state put in - this was not something that the commission did -put in a reopener clause, which said within 15 years, the state of Alaska - or the federal government, but the state of Alaska, primarily -could file a claim for up to $100 million more, reopening the original settlement so as to take account of harms that were not fully foreseen back in 1990.

That precedent was a major one, but I think you can see its logic. And my guess is that that precedent from the Exxon Valdez will be seen again in the Gulf and perhaps not just in criminal but in civil settlements, as well.

COX: That would be an interesting development, certainly, and one that I would imagine that BP's CEO Hayward is completely aware of as he says things like we are going to take care of this. Don't worry about it.

We're going to talk more about how much BP should pay in a moment. In fact, we're going to be getting calls from you, as well. Just to remind you, our phone number is 800-989-8255. The email address is talk@npr.org. You can also go to our website. Go to npr.org and click on TALK OF THE NATION.

We are talking right now with Zygmunt Plater, professor of law, the Boston College of Law, and chairman of the State of Alaska Oil Spill Commission's Legal Task Force over a two-year period after the wreck of the Exxon Valdez. I'm Tony Cox. Stay with us. It is TALK OF THE NATION from NPR News.

(Soundbite of music)

COX: This is TALK OF THE NATION. I'm Tony Cox, in Washington.

So far, BP has agreed to set aside that $20 billion to cover damages from the Gulf oil spill, another $100 million to pay oil workers who are laid off in the area. They've canceled their dividend to stockholders this year and promised to pay every legitimate damage claim that's filed.

The question now, is that enough? We are talking about today we are talking, today, about BP's liability from the oil disaster, how much will it pay in the short term and in the long run. What would BP have to do to satisfy you, is the question we're asking.

Again, we especially want to hear from those whose livelihoods are directly affected by the spill. Our number here in Washington is 800-989-8255. Our email address is talk@npr.org, and you can join the conversation at our website. Just go to npr.org, and click on TALK OF THE NATION.

Zygmunt Plater is still with us. He chaired the State of Alaska Oil Spill Commission's Legal Task Force after the wreck of the Exxon Valdez. We are also joined now by Alex Tabarrok I hope I said that correctly, Alex. Alex wrote a commentary for the Times' Room for Debate blog. He is the director of research for the Independent Institute and associate professor of economics at George Mason University, joining us from his office there. Alex, how are you?

Professor ALEX TABARROK (Economics, George Mason University): Great to be here.

COX: Did I get your name right?

Prof. TABARROK: Tabarrok.

COX: Oh, Tabarrok, okay. We want to make sure that we get that correctly. One of the things I found interesting about what you wrote in the New York Times was this. You called the president's handling of this, and it was very clever, quote: "The war on error," end quote.

Prof. TABARROK: That's right. So I thought the president was really, sounded a lot like the previous president - that he was going to, make no mistake, we will fight the spill with everything we've got for as long as it takes. We will make BP pay, he said.

Now, we all understand why he's doing that. He's responding to pressures to look tough. But really, this is a long-term problem. This is not about punishing a single company. It's about our dependence on oil and the fact that oil has a lot of external cost to it.

It has a lot of problems, such as promoting climate change and creating environmental problems and so forth, and we need to look at the long-term problems, the serious problems, and I didn't think the president did that.

COX: I wonder whether or not let me come back to you, Professor Plater, whether you agree with the assessment that this is not about punishing anyone, as Alex is suggesting. Some people would say, yes it is about punishing BP, and they want them to pay through the nose.

Prof. PLATER: Well, actually, I think that that's certainly part of it. BP will have to pay all of the harms that it's caused and also something for the wanton neglect and negligence that took place.

But Alex makes a point when he talks about the war on error. Mr. Obama inherited a system, what we called in Alaska, a mega-system, filled with error, and he's been running around trying to fix it.

I think I agree with Alex. The speech wasn't so clear, but the rhetoric was backed up, wasn't it, yesterday? I would suggest that the $20 billion fund has made a qualitative difference in the situation between 1989 in Alaska and 2010 in the Gulf.

It is a substantial innovation that most of us in the field have never seen before. And it brings the immediate prospect of relief.

I mean, if James Carville can be somewhat satisfied by one single decision, one single gesture, I think that this is one of those. So that BP will certainly have to pay.

But remember, there's a system, also, that's going to have to be reviewed, because we've learned that there is laxity throughout it. And every other company, it seems to me, is going to face intensive review and insured surety bonds.

COX: Let's take why don't we take this opportunity to take a call, see what the listeners have to say? I believe we have Daven(ph), if I'm saying that correctly, on the line with us from Albany. Welcome to the program, Daven.

DAVEN (Caller): It's Daven like Davenport, Iowa.

COX: Well, welcome to show, anyway.

DAVEN: Okay. So my question is: After the Exxon Valdez spill and, you know, the complete failure to pay for the damages, I mean, adequate time and adequate amount, were there any laws that were put into place to say how and when these oil companies were supposed to pay?

It really confuses me that Hayward is, you know, saying that getting BP to start paying for the damages is amounting to a shakedown. Yeah, that's my question.

COX: Thank you very much for the call, Daven. What about that, Professor Plater?

Prof. PLATER: Well, it's a good question because, you know, we learn from disasters, and we did learn a little bit from the Exxon Valdez. The OPA 90 is what we call it. The Oil Pollution Act of 1990 was passed by Congress. It accepted some of the recommendations from the commission in Alaska. It watered down some of the others.

But it made a basic change because it made it clear that companies would have expedited liability in certain regards, although in the non-statutory area, which is where most of the litigation in Exxon Valdez took place, it dragged on and on and on.

So some of the structure for improved response was passed after the Exxon Valdez so that it won't be quite so primitive as it has been in the Exxon Valdez case thereafter.

COX: We have another caller from Panama City. Glen(ph), you're on TALK OF THE NATION, welcome.

GLEN (Caller): Yes, thank you for taking my call, Tony. Let me say that first of all, I have no confidence whatsoever that BP or the government is being honest about whether or not they can even stop this spill. Are you there?

COX: Yes, we're here.

GLEN: Okay. What I'm saying is we're dealing with an area, right now, the size of Kansas that is covered with oil, and it is moving all over the place, and I believe that there's a very good possibility that they cannot stop this.

The materials that I am reading and I don't want to be alarmist point to oil head pressures above 17,000, possibly 50,000 PSI. I think they really need to call this an oil volcano. You're talking about billion-dollar liability.

If you turned everything that BP had upside down and sold the entire company, they would not be able to afford to pay. That wouldn't add up to one-tenth of the catastrophe that we're dealing with down here on the Gulf.

These people are using legal terms, and what we're talking about is a situation of Biblical proportion. Believe me, there are going to be people jumping out of windows in Louisiana pretty soon because of this conspiracy to silence. We need a contingency program here, not this legal rhetoric. Thank you, I'll...

COX: Well, let me see if I can get an answer for you. Thank you very much for the call, Glen. This seems to be in an area, Alex, where you have written about, in terms of what the long-term ramifications of the spill are and how, in your view, we should move towards prevention.

Prof. TABARROK: Yeah, let me make a couple of points. On Exxon Valdez, I don't want to get in too much of an argument with Zygmunt, but the an Anchorage jury, an Alaska jury, awarded $287 million in that case. That was the Alaska jury who had all the facts under their control.

So we shouldn't jump to this idea that Exxon did not pay. They certainly paid what the jury awarded, plus some.

On the compensation fund, the $20 billion, I think that's a very good sign. It's much more than was legally required by BP, and I think there is room there for a deal in that I was pleased to see that Feinberg, who ran the 9/11 Compensation Fund, is going to be in charge of that.

What made that 9/11 Compensation Fund work especially well, is that people who were paid out of that fund opted out of the tort system. So we removed a lot of lawyers, we removed a lot of fees, and we made it possible for a lot more of the money to go directly to the people who were injured, rather than being wasted in court processes.

Prof. PLATER: I think Alex is agreeing with me that this is a very substantial innovation. There were not just one jury, there were 15 or 16 juries that decided those cases. But it dragged on. And this is going to expedite the resolution in getting money to people.

Prof. TABARROK: We are in agreement with that point. It's a big number, and it will expedite things, and I'm hoping that we can keep the cost low by keeping the lawyers out of the system.

COX: Let me share some emails that we've been getting from our listeners. Here's one from Tom(ph) in Fairbanks, Alaska. Exxon spent over a decade appealing the $5 billion jury award from 1994, eventually getting it cut to $500 million. Many who, quote, won had long since lost their businesses or died. Has BP promised not to spend years in appeals? It was certainly worthwhile for Exxon, on top of the much reduced award, they had use of the money during the appeals.

I don't know if either of you has the answer to that, but let me read a couple more emails before you comment. Here's another from Maria(ph) in Minneapolis: I hope we can hold BP's feet to the fire, but I am enough of a realist to know that we will end up paying for the losses. As much as it will hurt and anger us, what other choice do we have? Do we let our Gulf Coast die because BP can't or won't pay?

And here's yet another from Charles(ph) in Sunnyvale, California. I think that the payouts to fishermen and others whose businesses may never be the same should be based on an assessment of the value of each individual business. The settlement amount would represent a buyout of each business.

Let me ask you both to comment on whether you think that there is -there could ever be a finite amount of money that could be set aside and paid to people that would make them feel whole again. Or is this an evolving kind of circumstance?

Prof. PLATER: It can never be enough.

COX: Yeah.

Prof. PLATER: It can never be enough.

Dr. TABARROK: Well, we'll feel that it's not never going to be enough, but let's be realistic. People lose - we're in a recession. Many people have lost their jobs. There's all kinds of trouble. We can't compensate everybody. And, you know, there are risks that - that's just the risk, unfortunately.

COX: What would you say...

Prof. PLATER: It's not a risk, though, Alex, that the people on the Gulf took. They didn't risk losing everything just to have the pleasure of the oil industry. I think it's important to note that it's not just legal persiflage to talk about the damages that can be awarded here. And they're going to be much faster from this fund than they would be from a courtroom full of lawyers.

I should note, also, Tom talked about punitive damages being strung out and strung out the Supreme Court quite actively turned rightward to cut back on the ability of people to get punitive damages to compensate for those intangible harms and for wrongful action. But I understand that was the common law decision by the court and that Congress could rescind that very quickly so that there will be a higher scope of recovery for people who are injured than existed back to the Exxon Valdez.

COX: But Professor Plater, I thought I heard you say - and correct me if I did not hear you say this - that there was not a risk involved. But isn't there a risk because of just the act of drilling for oil in a situation as we have seen offshore Deepwater? Isn't that an inherent risk?

Prof. PLATER: Oh, excuse me. Oh, absolutely. In fact, we argued that there should be citizen councils created - citizens' advisory council, citizen watchdog councils. They put them up in Alaska because of our recommendations, but they - the lobbyists kept them from the Gulf and the other coast. But those people would have said, you cannot go forward with a mile-deep drilling that has never been drilled that far - that deeply before without the most careful worst-case scenario and a contingency plan.

Glenn was talking about the need for a practical contingency plan in Alaska. We saw that the contingency plans were science fiction. And what we've discovered in the Gulf is that when Mr. Obama tried to use it, it was fiction. It had been created over the years by the industry and the agencies as fiction. We could do better if there were citizen watchdogs institutionally in the process. And I think there was no way there would have been permission to go forward in this place at that depth with the geology shifting down there and so much gas pressure. It just never would have happened.

COX: I want to come back to that point, to the both of you, and talk about what the differences are today versus what happened in the Exxon Valdez situation. We are talking with Zygmunt Plater, a professor of law at Boston College and the chairman of the State of Alaska Oil Spill Commission's Research Legal Task Force. We are also talking with Alex Tabarrok, associate professor of economics at George Mason University.

You are listening to TALK OF THE NATION from NPR News.

So let me come back to you while we wait to see if we'll get another caller who has something to add to the conversation. Is there something specific that either one of you can point to to say, this is different from what happened with Exxon Valdez either in a better way or in a much worse way than what we experienced the first time around? Alex, let me come to you with that.

Dr. TABARROK: Well, the $20 billion fund, of course, is a big difference. And there's a lot of money put upfront into an escrow account. It's not going to drag out in the courts. I think we can remove the lawyers. So I think that's a good thing. On the long run, however, this is isn't a new event at all. It's simply another reminder that not all of the costs of the oil are reflected in the price. You know, the oil generates climate change, environmental disaster. It finances anti-American governments around the world. So ultimately it's not BP who has to pay. It's everybody. We - what we really need to do is actually to increase the price of oil, and by doing so, to create incentives to move towards a cleaner, more environmentally friendly, energy system.

Prof. PLATER: I agree with Alex. And it seems to me that there are differences in atmospherics too. You know, everybody blamed the Exxon Valdez captain who'd had too many drinks, although our commission said it was really the corporate culture and the agency collusion that made that happen. But it seems to me that it's clear. This is operational. This is a systemic problem that took place. BP may have had 760 violations as the hearing said this morning, but every drilling platform out there had a permit from the Mineral Management System that was probably pretty lax, because we found over the past 10 years, that the agency was giving permits on the most vague of reassurances from the companies.

So Alex is right. You know, there is going to be a strenuous review of all existing, and not to mention, future deepwater drilling. There is going to be, I think, an increase on the surety bonds, which currently are tiny but will be increased under federal law that already exist to cover potential environmental harms. Everybody is going to have to pay more time and money to get oil, and prices of gas is going to go up if that's that price of safety.

COX: Our time is out there. There's one question that I want to ask you. I need just a yes or no answer, because it's an email from a listener and I want to read because I think it's important.

Dear TALK OF THE NATION, my question to you is what exactly is meant when Mr. Hayward uses the terminology all legitimate claims? Does that leave him a loophole to not say - to not pay some people? Yes or no, gentlemen? Does it leave him a loop hole?

Dr. TABARROK: Well, there are illegitimate claims.

COX: That's a yes or a no? A yes or a no?

Dr. TABARROK: So that's a - I suppose that's a yes.

COX: A yes. And yours, Professor?

Prof. PLATER: Yes.

COX: Yes. I appreciate it. Zygmunt Plater and Alex Tabarrok have joined us to have an interesting conversation about the BP spill. Coming up, though, the turbulent reign of the great singer Nina Simone. The author of "Princess Noire" joins us next.

I'm Tony Cox. It's TALK OF THE NATION from NPR News.

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