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BP Bailout?



MI's Nicole Gelinas suggests in the New York Post that the government will have to "bail out" British Petroleum over the oil spill, but that seems unlikely. Even if the US imposes the maximum $4300/barrel penalty under environmental laws for the spill, and it turns out that 4.5 million barrels of oil were spilled between the initial explosion and the August relief well, that's a $19.35 billion fine for a company that makes $20 billion in profits a year and has nearly $7 billion cash on hand. Add in a few billion more for damages and lawyers and cleanup costs, and the company—which has a $100 billion market cap after shedding 50% of its value in the stock market in the last few months—clearly doesn't need a bailout.

If anything, Britain is rightly concerned that the pensioners who rely on the $10.5 billion/year that BP pays in dividends are going to have wealth unfairly extracted by the US government and private attorneys. For example, the US government has devastated the energy industry with a six-month moratorium on deepwater drilling, but Secretary of the Interior Ken Salazar claims that the government will ask for compensation from BP for the government's overreaction. There is no cognizable legal theory to justify such a demand, but the government is likely to use the stick of criminal indictment to extort additional money from the company. Already, Obama has publicly criticized BP for being willing to continue its dividend payments.

Separately, the cleanup is being severely hampered by the US government's refusal to permit foreign shipping competition into the Gulf by an emergency waiver of the protectionist Jones Act.

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Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.