BP Panel Allows Congress to Act on Vow of Comity: Albert Hunt

Republicans and Democrats are planning to sit together during President Barack Obama’s State of the Union address tomorrow night. That might minimize the raucous high school-like cheering sections that have come to mark these sessions.

As a vehicle for finding common ground, this is mere symbolism. More telling moments may occur the next day in the less ornate hearing rooms of the House Natural Resources Committee and the Senate Energy and Natural Resources Committee.

Republican and Democratic lawmakers will hear testimony from the co-chairmen of the commission investigating the BP disaster last year in the Gulf of Mexico, former Democratic Senator Bob Graham of Florida and Bill Reilly, a Republican who once headed the Environmental Protection Agency.

Earlier this month, the commission, appointed last May after the biggest oil spill in U.S. history, called for an end to the cozy relationship between government regulators and the oil industry via the creation of an independent agency that would be more shielded from political pressure. If regulators and London-based BP Plc had done their job right and put safety first, the spill wouldn’t have occurred, the Graham-Reilly panel concluded.

At the same time, however, it said the U.S. needs the oil from offshore drilling, and that while the liability cap on companies for accidents should be raised from the unrealistically low $75 million, it shouldn’t be unlimited.

Balanced Report

The reaction from the White House to the proposal was muted, if mildly supportive. The findings got pretty good reviews in Louisiana; Democratic Senator Mary Landrieu said she was “grateful” that such a balanced report was produced.

Activists and some politicians, on both sides of this divisive issue, weren’t as generous. The political left was distressed that the commission didn’t come out for banning off- shore drilling, or eliminating, not simply raising, the liability cap for oil companies.

“If we let the oil companies keep drilling off our oceans, eventually we’ll lose all our beaches and our fisheries,” said Andrew Sharpless, the chief executive officer of Oceana, an ocean-conservation advocacy organization in Washington.

The industry and the political right, including some top House Republicans, were displeased by calls for more spending on safety protection and especially on more federal regulation. Michigan Representative Fred Upton, the new chairman of the House Energy and Commerce Committee, said his panel would look at the report, while suggesting it was incomplete, leaving “unanswered the fundamental question of what went wrong.”

One Rogue Company

Much of the industry complained that in calling for tougher regulation generally, the bipartisan commission painted with too broad a brush, that the problem was one rogue company, BP, and a single incident.

“This does a great disservice to the thousands of men and women who work in the industry and have the highest personal and professional commitment to safety,” said Erik Milito, the director of upstream and industry operations at the American Petroleum Institute in Washington.

There were legitimate critiques. One of the most interesting was from Ben Heineman Jr., the former general counsel for General Electric Co., who, in an article in the Harvard Business Review, said the commission gave the BP board of directors a pass on their inadequate oversight. Also, without subpoena power, the commission was unable to get some potentially important specifics about the incident.

‘Systemic’ Problem

In interviews last week, both chairmen of the seven-member commission said they went into the task thinking BP was a rogue company, and came out believing the accident reflected a broader, “systemic” problem for the regulators and the industry. The report concludes that Halliburton Co., which BP contracted to seal the well with cement, and Transocean Ltd., the owner and operator of the Deepwater Horizon rig, were more culpable than initially thought.

“It’s implausible that Halliburton only would give faulty cement to one operator, or that Transocean would fail to detect a faulty rig on only one operator’s platform,” Reilly said.

Further, Graham, who also was once governor of Florida, highlights the broader public interest in regulating offshore activities: “This is private enterprise operating on publicly owned property. The government has an interest as a regulator not only for environmental safety and protection, but also as a landlord to see that its property is not trashed.”

Gulf Seafood Industry

Beyond the environmental havoc BP caused, there was severe ancillary damage, they said. For the Gulf seafood industry, business dropped about 30 percent in the aftermath of the spill.

For U.S. Interior Department regulators, the Graham-Reilly commission’s plan would end the “co-mingling” of two distinct missions -- promoting rapid energy expansion and ensuring safety. The commission also calls for raising the limit on industrywide contributions to the Oil Spill Liability Trust Fund, which pays damages from an oil spill above the liability limit of the company that caused the incident. Eighty percent of any penalties would be devoted to cleaning up the Gulf, which has been environmentally ravaged for decades.

To the dismay of some environmentalists, the commission said the more important issue was safer offshore drilling, not cessations or moratoriums. It noted that offshore oil resources currently generate about one-third of U.S. production and contain more technically recoverable resources than all on-shore and shallower-water resources combined.

‘Major Source of Domestic Petroleum’

“Offshore will be a major source of domestic petroleum for the foreseeable future,” Graham said.

Partisan battles in U.S. politics often are inevitable and healthy. If both Republicans and Democrats frame comprehensive, competing health-care proposals, and deficit-reducing budgets and specific job-growth plans, it will constructively frame these issues for voters.

There are, however, occasions where it’s good for both sides to come together, as is evidenced in the favorable public reaction to deals cut on economics, arms control and social issues in December. The Reilly-Graham commission offers a starting venue for another such opportunity. As memory fades of the tragic consequences of the Deepwater Horizons rig explosion last April, Reilly reminds us there’s another reason for Congress to act on these recommendations: “The reality is this could happen again.”

Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Albert R. Hunt in Washington at ahunt1@bloomberg.net.

To contact the editor responsible for this column: Max Berley in Washington at mberley@bloomberg.net.

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