* UPDATED* Obama Administration Readies Legal Response to Gulf Oil Disaster

Eight weeks after the Deepwater Horizon exploded, killing 11 workers and spewing forth untold millions of gallons of crude oil spilling into the Gulf of Mexico President Obama addressed the nation with the outline of what to do next.  Let’s be honest here.  There doesn’t seem to be any good way to stop the oil flow.  We don’t even really know how much oil is leaking.  And to add insult to injury lightening even struck the ship trying to contain as much oil as it can.

But today did mark a day of activity with some significant developments.  Oil executives faced hostile members of Congress, making it even more clear that the oil industry has never been focused on safety and disaster prevention as much as it has been focused on the media response in the face of a disaster.  As much as BP and the rest of the industry tries to control the message around the disaster, it is clear that the public doesn’t have the stomach for it.

There’s been a significant amount of criticism levied the President’s way.  Some of that has been founded, and some of it has been misinformed.  But what came through in the address tonight, and in the steps taken in the recent past, is that the administration is doing what it can, when it can.

Let’s take a look at what it has done.  Beth Buczynski has provided excellent analysis for Care2 on the disaster, so I’m not going to even try and repeat her coverage here.  Rather, here’s a brief overview, and I encourage you to look at Beth’s work for some of the finer points on the environmental toll of the Gulf spill. 

For starters, the administration’s initial response was hamstrung by the Oil Pollution Act of 1990.  Passed in response to the Exxon Valdez disaster, the OPA mandates that the “responsible party” bear the cost and burden of the cleanup.  In the wake of Exxon Valdez Congress, and the American public, were outraged at the idea that taxpayers would have to foot the bill to clean up after an oil company’s negligence and wanted procedures in place to address future disasters.  With Deepwater Horizon, that outrage has come full circle as the administration takes shots for not stepping in and doing more immediately. 

Second, once it became clear that BP’s disclosures surrounding the accident and the amount of oil leaking were suspect at best, the Department of Justice opened an investigation.  This is no small matter and will prove to be a significant thorn in BP’s side–particularly given the fact that, under OPA, they had significant financial incentive to misstate material facts concerning the amount of oil flowing as a means of decreasing financial liability.

Moving onto the actions taken and outlined today, it is clear that the Department of Justice will play a key role in dealing with this disaster, even if not apparent at first.  For example, part of the President’s response includes establishing a contingency fund that will mandate BP set aside “resources to compensate the workers and business owners who have been harmed as a result of [his] company’s recklessness”.  The language here is important as “recklessness” is a legal term of art that carries with it criminal implications.  I’m sure this sentence did not go unnoticed by BP’s legal counsel.

The call for an escrow fund also works to put BP on legal notice that any transference of funds, in any fashion, will be viewed with a presumption of fraudulence.  In response to this disaster BP’s stock has plummeted and the company is facing, at the most recent estimates, nearly $40 billion dollars in liabilities.  Bankruptcy, at least for the BP America, is a real possibility, and bankruptcy would leave much of those liabilities, including fishermen and local economies, uncompensated.  This is the administration’s first shot at cutting that possibility off at the pass, and should BP continue to play fast and lose with its numbers, expect an even bolder response by DOJ.

That call for an escrow fund was answered almost immediately as BP announced it was suspending divident payments to shareholders and placing $20 billion into a fund to pay claims to fishermen and others along the Gulf Coast.  The administration was quick to note that the $20 billion in now way acts as a ceiling for damages claims against BP and is separate from a government workers fund also announced that will go towards oil rig workers who are out of work as a result of the drilling moratorium.

The $20 billion fund will be administered by lawyer and mediator Kenneth Feinberg who managed the victims fund in the wake of the 9/11 attacks.  Feinberg is an excellent choice given his history in managing complex damages actions like the 9/11 claims, asbestos-exposure claims, and agent orange claims. 

The significance of this development cannot be understated.  Over ten years later and claims related to the tragic Exxon Valdez spill are still being disupted by Exxon.  The Supreme Court, under the guidance of Chief Justice Roberts, recently cut the overall damages award for those claims to less than $600 million.  The creation of an independently managed fund not only circumvents the lengthy claims process for many of these claims, it protects BP’s solvency which insures that victims will be paid.  This is smart, tough politics.

The next significant response by the administration, and one that signals a tough, prosecutorial stance with BP was today’s announcement former Justice Department inspector general Michael Bromwich was the administration’s choice to head the Minerals Management Service, the troubled agency that oversees offshore drilling. 

Bromwich is an excellent choice if the administration is serious about cleaning up MMS.  He is specifically NOT an oil and gas man, making him a significant change in culture and leadership at MMS.  He has a reputation for cleaning up embattled and corrupt agencies.  In his address the President made it clear that the belief that agencies should be run by those who view regulation with hostility must come to an end.  MMS has been run by oil and gas insiders which perpetuated a culture of corruption and ineffectiveness.  Bromwich’s choice makes it clear that this agency will no longer be a pawn of the industry but instead finally meet its watchdog role.

Yes, the speech could have given more detail, and yes, the devil is in the details in terms of really, truly dealing with this disaster.  This country must find a way to kick its oil dependence, and that goes a lot deeper than simply taking the bus to work.  Congress must find the political will to act in the interests of this country, not the oil donors funding their re-election campaigns.  But in terms of the legal realities accompanying this disaster, the developments today are significant and they set the stage for solving those much more difficult political problems.

photo courtesy of DVIDSHUB via Flickr

57 comments

Charles Webb
Charles Webb6 years ago

If BP is required to pay all the people who lost wages due to the oil leak, then the gov should reimburse the wages of all the oil rig workers that are out of jobs due to the drilling moratorium.

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Dave Tohunga
Dave te tohunga7 years ago

How come no one seems to mention the hands on role of Halliburton in manufacturing this utter disaster?
As to compensating the victims, i keep hearing about 911 first responders who are getting no assistance, the fund for their benefit has been locked up by lawyers to minimise or avoid payouts for thousands, and what of ordainary New Yorkers who were exposed to the toxic fallout from the 911 Inside Job.
And then there are the people who got shafted after the Exxon Valdez disaster despite the fund set up.
It is in the criminally negligent parasites interests to obfusticate, to delay and to wriggle out of their obligations. The cases of the tobacco and the asbestos industries reinforce my cynicism. Trust politicians, public officers and corporates? You'd have to be a total idiot with no knowlege of history.
Make those responsible pay personally and individually, just like a drug dealer has their personal assets seized, for are these people not being so highly renumerated on the basis that they act wisely, honestly and intelligently?
Yet they appear to be criminally neglicent incompetents taking money under false pretences.
Those are my thoughts for what they're worth.
The day these corporates are held accountable is the day they're stopped from buying and selling politicians and public officials in the marketplace.

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johan l.
paul l7 years ago

Please give Pres. Obama a razor so he can cut hiw own throat.
He does not have to wait till the next elections to know that he has lost the confidence of even the most Democratic democrats!

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Laura Wopp
Laura Wopp7 years ago

Best written article I have been assaulted w/ by mass media; I am proud to say that I think Obama is doing the best he can....a disaster of this magnitude within his 2nd year in office (after cleaning up after the lethal Bush years) Bromwich has my vote!

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Jack T.
Jack T7 years ago

America's besieged mentality!

http://www.brasschecktv.com/page/847.html

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Salome Waters
Salome Waters7 years ago

Please, after all this time and disaster after more disaster, let me awaken tomorrow and find it was just a dream, just a dream. Oh please?

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Mary L.
Mary L7 years ago

What is in front isn't what is always what's behind the scenes.

It seems as though even where there are rehearsals for disasters, they still fumble around lost.

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Lionel Mann
Lionel Mann7 years ago

Rita,
Very intriguing! Has anyone investigated possible sabotage? Certainly BP did not want this catastrophe.
As regards a legal response, that will still be under review when most of us are dead and gone. Lawyers spin out any case as long as possible in order to increase their fees, and anything as big as this will bring them millions.

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Rita Walpole A.
Rita Walpole A7 years ago

I left a message for the Pres. on his White House line. Kudos to Pres. Obama on this one." In the past, I've left messages far from congratulatory re. the continuation of our never ending war mode, failure of the Pres. to be a lot tougher and eed to be a lot less conciliatory to the greed and power addicts, etc. And kudos too to the DOJ, particularly in light of Hariburton having spent $240 million, just days before the oil blast happened, on the purcahse of an oil spill clean-up company. Now there's something to investigate, DOJ - more karlrove style manipulation possibility in the entire oil spoil tragedy. Living as we do under the rule of the few billionaire rulers who have managed so well the coup de etat, ANYTHING is possilbe, and NOTHING should be ruled out, but rather fully, impartially investigated. And all whistle blowers fully protected and rewarded very openly - a.k.a. the beginning of our doing what it takes to.....
UNDO THE COUP!

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Lynn C.
Lynn C7 years ago

The escrow fund sounds good except...my brother, a salmon fisherman in Alaska, has waited 20 years for the monies put in escrow after the Exxon Valdez oil spill. Many of his fellow fisherman died waiting for compensation. This situation, I hope, has enough public reaction because of it's sheer size, that the people along the gulf might have help a little faster.

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