ESSAY- BP: It stands for Bad Petroleum
The White House recently warned BP that it expects the oil giant to pay all damages associated with the disastrous oil leak into the Gulf of Mexico, even if the costs exceed the $75 million liability cap under federal law. BP responded by saying its public statements are "absolutely consistent" with the Administration's request.
When you hear dueling public statements like these, watch your wallets. You can safely assume BP's lawyers are already at work to ensure that the firm pays not a cent more than $75 million– not to taxpayers bearing cleanup costs, not to consumers whose gas bills will rise, not to businesses along the coasts that will lose a fortune. And BP won't pay more unless or until there's a law requiring it to.
BP has been making public statements about its supposed Corporate Social Responsibility for as many years as it's behaved irresponsibly. It's the poster child for PR masquerading as CSR.
It was just eight years ago British Petroleum shortened its name to BP and began promoting itself as the environmentally-friendly oil company with a vision that went "Beyond Petroleum" to embrace solar cells and wind power. In a $200 million advertising campaign organized by Olgilvy & Mather, BP transformed its corporate brand insignia from a shield to the more wholesomely natural green, yellow, and white sunburst. BP's chief executive, Lord John Browne, issued warnings about global warming and said the company had a social responsibility to take action.
Notwithstanding its new image, BP continues to be one of the largest producers of crude oil on the planet. Although it committed itself to devoting $8 billion to alternative fuels over ten years, the sum was tiny compared to BP's annual profits from oil that have averaged over $20 billion and its annual capital expenditures of over $14 billion.
Nor has the firm distinguished itself by its commitment to the law. Several years before the Gulf oil rig explosion, an explosion at BP's Texas City plant killed fifteen workers and triggered a $21.3-million fine from safety regulators.
In March 2005, corrosion of BP's pipes and equipment on the North Slope in Alaska led to a spill of 270,000 gallons of oil, the largest spill ever recorded in that fragile territory. Critics said BP wasn't spending enough money to prevent such spills. Only in 2006, after it was forced by the U.S. government to inspect all its pipelines with an automated device that crawled through the pipes, did the company discover so much additional corrosion and leakage it had to shut down a sixteen-mile feeder line to the Trans Alaska Pipeline.
In August 2006, Congress demanded BP executives appear in person to be held accountable. At the ensuing hearing, members from both sides of the aisle accused BP executives of crass negligence. Representative Joe Barton (R-Texas), chairman of the oversight committee, excoriated them: "If one of the world's most successful oil companies can't do simple basic maintenance needed to keep the Prudhoe Bay field operating safely without interruption, maybe it shouldn't operate the pipeline." Barton went on: "I am even more concerned about BP's corporate culture of seeming indifference to safety and environmental issues. And this comes from a company that prides itself in their ads on protecting the environment. Shame, shame, shame."
Committee members then grilled the BP executives about why the company had failed for as long as fourteen years to do the sort of internal inspection and maintenance on its pipelines that were performed every two weeks on the Trans-Alaska Pipeline, into which the BP pipelines feed. The BP executives solemnly promised to be more careful in the future.
But neither the members of Congress nor the BP executives mentioned the most pertinent fact: Frequent inspections of the Trans-Alaska Pipeline were required by law but no similar inspections were required on feeder pipelines such as those owned by BP. If the panel was serious about getting BP to change its ways it would have introduced legislation to close this loophole. The panel did not introduce such legislation because the hearings were for show. Barton and his colleagues on both sides of the aisle had pushed many bills favorable to the oil industry and weren't about to impose any burdens on it.
Ad campaigns about corporate social responsibility are cheap. So are public scoldings by politicians about a corporation's irresponsibility. Watch not what they say but what they do. The only way BP will pay more than $75 million– and the costs of the spill will easily top that– is if they're required by law to do so.
Robert Reich, former Secretary of Labor in the Clinton administration, is Professor of Public Policy at the University of California at Berkeley and the author of "Supercapitalism." This essay– which has been published on Huffington Post and other places– follows last week's, by Randy Salzman, on a similar topic.