BP's New Lobby Tactic: Holding the Escrow Fund Hostage
When BP agreed to set up a $20 billion escrow fund, most folks cheered (even BNET's Carbon Based gave cautious approval). But once the details of the agreement were released a few, notably Public Citizen in a letter to President Obama and later coverage by Mother Jones reporter Kate Sheppard, pointed out one major flaw with the deal: Payments are contingent on BP's Gulf of Mexico subsidiary remaining profitable.
How is that possible? The escrow account agreement was made with BP Exploration and Production, the Gulf of Mexico subsidiary of BP America, not the parent company. And as the name implies, this subsidiary can't turn a profit without exploring for and producing oil and gas from the region. In short, BP needs the unfettered access it's had in the past to drill in the Gulf.
There's one hitch in this deal, which has sent BP into a lobbying tizzy. The Consolidated Land, Energy and Aquatic Resources Act of 2009, or CLEAR Act, which passed the House on July 30, includes language that would bar companies from receiving permits to drill on the Outer Continental Shelf if more than 10 fatalities occurred on its offshore or onshore facilities. Any company that had been penalized with fines of $10 million or more under the Clean Air or Clean Water acts within a seven-year period also would be barred from new drilling permits. BP is the only company that currently meets that description.
BP isn't pleased and is now warning that the CLEAR Act would threaten its ability to pay for all damages caused by the oil spill. It's true that the Gulf is an important piece of BP's profit machine. Some 11 percent of BP's global production comes from the Gulf. Still, the company is hardly asset poor. BP values its total assets at nearly $250 billion. And even with its previously announced plans to sell off about 12 percent of its assets, BP will still remain one of the largest oil and gas producers in the world.
Photo from Flickr user sindesign, CC 2.0
For complete coverage, see All Things BNET on BP's Gulf of Mexico Spill
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