by Shuly Cooper
Q. #1 – Who is in charge?
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Who is in charge over the clean up of US shores and reparations?
The answer to this question involves BP (the “top dog” among its three sub-contractors, Halliburton, Transocean and Cameron International); and an additional party – US citizens, who “own” the beaches and are hurt. Their environment and livelihood are being destroyed.
In a contractual relationship, the party that causes any damage, by deviating from the written contract, is responsible for the cleanup work, direct/indirect costs and compensation. This means that contracts have to be clear and at a sufficiently low level of detail, involving the engineers/scientists of both sides of the contract –> I.e., a complex project requires a pyramid scheme of contracts with increasing levels of details. The quality of the contract(s) is the responsibility of the hiring-party. In this case – the US government, which has to educate itself in the subject matter, or better, hire experts in the field of interest, in order to protect its interests.
Before the contract is signed, the hiring-party is responsible to verify that the sub-contractor can perform the job as described in the contract(s). Following the signing of the contract(s), the hiring-party is responsible to audit the sub-contractor’s work, using its experts, and keeping the lines of communication open.
In this case, the hiring party, the Mineral Management Service (MMS), which is part of the US Department of the Interior, manages the mineral resources of the US shores and collects lease money from companies that drill in the area. The contract between the MMS and BP, especially the Risk Management Plan (which should be an integral part of the contract) was extremely poor [source – CNBC/ Rachel Maddow and CNN/Anderson Cooper]. Note, Elizabeth Birnbaum, the Director of MMS has resigned following this incident.
If the sub-contracting party under-performs, there is a case for malpractice charges and the compensation level directly correlates to the contract stipulation and clarity. One of the reasons that BP has taken lightly the Risk Management Plan and its environment-protection responsibilities is the fact that the US Congress had put a very low penalty-cap on the oil companies – 75 million dollars (!) (about one day total revenue for BP (!) ) [source - http://www.southernstudies.org/2010/06/caps-on-oil-spill-liability-create-incentives-for-spills.html]. Therefore, gaining 20 billion dollars from BP (and probably more) is a “big-win”.
So “who is in charge” on the US shores?
On 5/27/10 President Obama declared a moratorium, stopping all deep oil exploratory drilling, which are over 500 feet deep, in the Gulf of Mexico for six months. 33 rigs are impacted out of >3600 production rigs in the Gulf [source – CNBC/ Rachel Maddow]. On 6/23/10 – the U.S. District Court Judge Martin Feldman blocked this moratorium. The Interior Secretary Ken Salazar appealed Judge Feldman’s ruling and some of these rigs are still down.
The editorial opinion – six months moratorium is hardly sufficient time to create new safety guidelines, hire new personnel, audit hundreds of “free-reined”, exploratory oil rigs along the US shores, implementing the latest and best technologies available and understanding the impact of such disasters.
What is your opinion?