Showing posts with label BP. Show all posts
Showing posts with label BP. Show all posts

Sunday, June 13, 2010

The Politics Of BP's Dividend Payment: Should BP Pay A Dividend As The Gulf Of Mexico Oil Spill Rages On?


Several weeks ago I posted a piece on the BP oil spill in the Gulf of Mexico. At that time I was optimistic that the oil spill would be quickly resolved. We are now more than 50 days out and still no resolution. The environmental damage to the Gulf of Mexico, and specifically to Louisiana, Alabama, and Florida, is mounting each day.

According to BP's latest press release the company has spent $1.43 billion on the oil spill thus far. Estimates on the clean-up cost of the oil spill range from $3 to $40 billion over a period of several years. Last year BP had a cash flow of $30 billion. Undoubtedly, this will be a costly accident.

BP has proposed paying a quarterly (for the second-quarter) dividend of an estimated $2.4 billion. According to BP's annual report the company paid dividends of $10.5 billion last year.

Political pressure is mounting to suspend or halt BP's payment of dividends until the Gulf of Mexico oil spill is resolved or brought under control. BP's CEO Tony Hayward will likely face intense pressure and get push-back on the dividend from members of Congress when he testifies next Thursday on the oil spill.

Apparently, members of the BP Board of Directors are discussing a plan to set up an escrow fund to place the $2.4 billion dividend payment until the Gulf of Mexico oil spill is brought under control.

What do you think? Should BP be pressured to suspend or halt all dividend payments until the Gulf of Mexico oil spill is resolved? Alternatively, would the establishment of an escrow fund be a satisfactory resolution? Should BP look out for BP shareholders? Should environmental clean-up and remediation take top priority? The BP oil spill presents important questions on shareholder primacy, corporate responsibility, and the role of the corporation in our society. I look forward to hearing your thoughts.

Tuesday, May 4, 2010

Worst Oil Spill in U.S. History Will Devastate the Ecosystem, Economy, and Culture

Two weeks ago a British Petroleum oil drilling rig operating in the Gulf of Mexico exploded, and the riser oil pipe which transported the oil from the sea floor to the surface collapsed, and began gushing oil in three separate rupture points. A video illustrating how the rupture occurred, and potential engineering solutions to stem the oil flow is available here. Two days prior to the explosion Halliburton (former VP Dick Cheney’s company) had successfully completed cementing the oil pipe rig to the sea floor and connecting the riser to the oil rig on the surface or so everyone thought. Some are beginning to blame not only BP but Halliburton as well for their negligence. As a result of the explosion and subsequent pipe rupture, approximately 200 gallons of oil is gushing out of the three rupture points into the Gulf, and the wind is quickly pushing the oil towards the Texas, Louisiana, Mississippi, Alabama and Florida coast lines.

The enormity of this oil disaster is difficult to comprehend. I am myself struggling to grasp all of the variables that are at play. My co-blogger, Joseph Grant wrote an excellent commentary on Saturday addressing the impact of the Gulf oil disaster on the current American energy policy to allow drilling in the Gulf of Mexico. I would like to modulate the focus of the discussion a few degrees, and discuss the oil spill and its devastating impact on the environment, economy and American culture.

Dr. Robert Thomas, professor and director of Loyola University’s Center for Environmental Communication in New Orleans, explains that the BP oil spill’s impact on the environment will be disastrous. According to Dr. Thomas, the coastal wetlands of Louisiana are the most productive ecosystem along the coast in our country. Forty percent of the fisheries of the continental United States are based in the Gulf of Mexico wetlands. Alaska has extremely productive fisheries, simply think Alaska crab legs and salmon. However, holding constant the richness of the Alaska fisheries, the Gulf of Mexico, in particular southern Louisiana has seven of the top ten ports for fisheries in the United States. Ninety percent of the species of commercially important fisheries in the Gulf use coastal wetlands as their nursery grounds, including shrimp, crabs, oysters. Louisiana is the “mecca” of fisheries in the continental United States. The impact on the Gulf ecosystem can be damaging. The reality is that fish can possibly swim away from the oil. So can whales and possibly dolphins. Hopefully, they will return in the near future but for oysters who grow on the reefs, and crabs and shrimps that lay their eggs in the wetlands, when the oil comes in on top of them it’s just going to be devastating. Sea birds such as pelicans and gulls will also be devastated. They could simply fly away and some will. But what of those that have built their nest and laid their eggs in low lying barrier islands, which are just barely above sea level, throughout the coast of Louisiana, Mississippi, Alabama and Florida, when the oil-enriched waters arrive. Like any parent, the adult birds will not leave their young, and the eggs and the baby birds will be completely covered by oil along with their parents who will try in vain to protect their young. None of them will survive.


Residents in coastal communities in Louisiana have begun reporting that the oil sheen has washed up on some parts of southern Louisiana. Local residents working alongside the U.S. Coast Guard have created more than 218,000 feet of boom (orange cylindrical devices designed to prevent the oil from reaching the coast line) has been placed throughout the Gulf, most of it off Louisiana's coast. People are beginning to question not only BP's slow response to the spill but also the Obama Administration’s response, which has been measured. Sally Brice-O'Hara, Coast Guard Rear Admiral, was questioned on Friday morning about whether the government has done enough to push BP to plug the underwater leak and protect the coast. Admiral Brice-O’Hara stated that the “federal response led by the Coast Guard has been rapid, sustained and has adapted as the threat grew since the drill rig exploded and BP has failed to stem the flow of oil into the Gulf… The Coast Guard has been closely monitoring efforts led by BP to contain and stop the oil spill and has filled in gaps where needed.” We may be witnessing the death of American seafood industry for the next few years, which is estimated to be approximately $2 billion per annum. We forget sometimes that every industry is comprised of not only the product or commodity being sold, but also the people within the industry. The seafood industry like many industries is people intensive, it is viewed by many as an inter-generational industry. For fourth-generation oyster farmer John Tesvich, looking out to sea off the coast of Louisiana, the future is daunting. For Tesvich, the future looks very bleak. "It's just like what we saw with Hurricane Katrina... At first, it was just another storm, just like this was just another oil spill. But by the time they realize how bad it really is, it's too late." A video illustrating the impact, of the reality of the BP oil spill on people’s livelihood and future is available here.


I am a little baffled by BP‘s and Halliburton’s inability to control the oil that is spewing out of the riser pipe. I understand the basic argument that a pipe ruptured. I also appreciate that the engineers are working with sensitive robotic equipment in attempting to cap the leaks, and that they are working under extreme oceanic pressure in pitch blackness. But why is it taking soooo long to fix? I am most astonished by BP’s and Halliburton’s apparent lack of preparedness for the magnitude of this catastrophe. Where is BP’s and Halliburton’s risk analysis and corresponding contingency plan to contain the damage? An oil pipe rupturing is not a “force majeure” or an “act of God.” This was a completely foreseeable catastrophic “worst case scenario.” BP and Halliburton should have been better prepared to handle this catastrophe. In 1989 the Exxon Valdez oil spill caused billions of dollars of damage to the Alaska coast line. The Alaskan ecosystem is still dealing with the damage to this day. Have we learned nothing from Exxon Valdez?


Risk and actuarial experts will argue that the extent of the damage caused by Exxon Valdez and the current Gulf oil spill were not properly calculated because they are the "worst case scenarios" and the "probability" of a disaster of that magnitude occurring fall into the category of “wildest dreams.” Therefore, there is no contingency plan for a disaster of this magnitude. But in the last few years one thing has become certain, when it comes to energy exploration and transportation worst case scenarios do happen—-coal mines collapse, “freak” waves destroy oil rigs, oil ships run aground, oil pipes rupture, oil rigs do explode, and people really do die. A video illustrating the harsh reality of when "wildest dreams" come true is available here. The time has arrived when energy companies must be held accountable not only for clean-up costs but also for failing to be prepared for foreseeable "worst case scenarios" that cause severe damage, destroy lives, and threaten the very survival of the ecosystem, economy and culture. In the words of Hugo Voltaire, “greater than the might of a thousand armies is an idea whose time has come.”

Lydie Nadia Cabrera Pierre-Louis

Saturday, May 1, 2010

When Drill Baby Drill Becomes Spill Baby Spill: The BP Louisiana Oil Rig Tragedy

Drill Baby Drill!!! During the 2008 Presidential Election Campaign this was the mantra chanted at Republican rally after Republican rally. Crowd-after-crowd in city-after-city was stoked up by politicians like John McCain and Sarah Palin in passionate calls for more off-shore oil drilling. In 2008, American consumers were facing pain at the gas pump—gasoline was selling for over $3.00 per gallon in many parts of the country. Politicians, like McCain and Palin, latched on to a rather mindless and short-term solution to our nation’s oil problem. Why don’t we open our shorelines up for off-shore drilling? Won’t we add millions of barrels of oil to our supply and thereby decrease our dependence on foreign oil? The world will be wonderful and gas prices will go down. This was the rhetoric pushed on us by a number of our politicians at the time. Unfortunately, in this country our political leaders often reach for short-term solutions rather than long-term solutions—I guess it is the political climate—in this country no matter the party (Democrat or Republican) it has become increasingly hard to govern a partisan, mistrustful, and restless populace. How hard is it to govern? Ask President Obama.

Several weeks ago I was struck by a political announcement—President Obama announced plans for his Administration to move forward with plans to increase off-shore oil drilling. During the 2008 Presidential Campaign, Candidate Obama opposed increased off-shore oil drilling. Flash forward to 2010, President Obama reversed course and announced plans to increase off-shore oil drilling. Drill Baby Drill became the official policy of the Obama Administration. I can only speculate, but it appears that President Obama was sending an olive policy branch designed to placate Republicans, by announcing his newfound support for off-shore oil drilling.

The Louisiana BP oil rig tragedy this past week has forced us to examine and deliberate on the efficacy of off-shore oil drilling. It appears that this tragedy could eclipse the 1989 Exxon Valdez oil spill in Alaska. Coastlines from Texas, Louisiana, Mississippi, and Alabama could be affected. Already, these are fragile coastlines and ecosystems. The first oily birds have started to reach the beaches. This is a tragedy beyond belief. It will take years for this region of the country to recover.

Are we really willing to bear these sorts of tragedies for a meager amount of more oil? How would you like to see the beaches of Maryland, New Jersey, and Delaware choked with oil? This is something no right-minded person would want to see. This should serve as a wake-up call for our nation’s leaders to develop a comprehensive alternative energy program. We can’t keep drilling for oil. We literally are destroying our planet and environment. Selfishly we are destroying the future of our children and grandchildren.

How does all of this relate to corporate justice? Keep reading and I’ll explain to you how this relates to corporate justice. Well, this week I was driving (yeah, burning oil) and listening to a right-wing radio host blast President Obama’s response to the BP oil spell. The talk show host blasted what he dubbed as Department of the Interior SWAT teams being deployed to inspect off-shore oil rigs. The talk show host characterized the Obama Administration’s response as a move to a police state, where the government would conduct warrantless searches in violation of the Fourth Amendment of the Constitution. This radio host went on to say that President Obama was planning to nationalize the American oil industry. The host compared President Obama to Hugo Chavez. What was this guy smoking or drinking? Remind me not to drink from his cup. This is nonsense!

BP realized early on that its resources were inadequate to respond to an oil spill of this magnitude. BP specifically asked for government help. Apparently, the NAVY has at its disposal remotely-operated dive vessels and robots that can assist in capping the leaky oil rig. The NAVY would lend these vessels to civilian authorities to assist in their mitigation efforts.

Some schools of political thought preach a gospel that the government is always an impediment and should step aside. The gospel preaches that corporations and free-markets are be-all-to-end-all of the world. Again, government has no role in our lives. This harkens back to the right-wing radio talk show host that I referenced a moment ago. Instead of truly talking about the role that corporations and government can and should play vis-à-vis one another, this radio talk show host was distracting his targeted listeners from the real trouble. Yes, corporations are vast and control enormous resources—still there are times when they are playing outside of their league. This time around, BP is in the midst of a tragedy of nation proportions. Even with billions of dollars, BP can’t buy its way out this one. Undoubtedly, BP needs the government’s help. More importantly, the people of the Gulf of Mexico region need their government’s help in this time of need and tragedy. This tragedy reinforces in our minds that the path of corporations and governments sometimes collide and intersect.

Where are the people who were yelling Drill Baby Drill? What happens when the mantra gets reversed to Spill Baby Spill? I’m curios to hear your thoughts on the BP oil rig tragedy. What role and culpability do corporations like BP have when things go tragically bad? What role does or should the government play in this these types of tragedies or disasters? I want to hear from you.

Saturday, October 31, 2009

OSHA Levies Record $87 Million Fine Against Oil Giant BP

The Occupational Safety and Health Administration (“OSHA”) levied a record $87 million fine against oil giant BP. The fine stems from events that took place in 2005, in connection with an explosion at a Texas City, Texas oil refinery owned and operated by BP. At the time of the explosion(in 2005), 15 workers were killed and 170 other workers were injured. Ironcially, Texas City is also the site of a 1947 ammunition explosion that killed 581. The 1947 Texas City Disaster is acknowledged as the largest industrial disaster on American soil.

The fine comes on the heels of OSHA’s 6-month inspection of the Texas City facility that revealed hundreds of violations of a 2005 settlement agreement to repair hazards at the refinery. OSHA officials found and cited 270 violations totaling $56.7 million in penalties on BP’s part in failing to correct violations indentified and required to be correct as part of the 2005 settlement agreement with OSHA. Additionally, OSHA inspectors uncovered 439 new willful violations which totaled $30.7 million. The new fines stem from BP’s failure to repair pressure relief valves and safety devices at the refinery.

This is the largest fine that OSHA has levied in its entire history. BP has 15 days to agree to pay the fines and take corrective measures. Alternatively, BP has the option of contesting the fines through a hearing process. BP has indicated that it might appeal the decision.