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    Default what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    originally posted by Dirty Ernie in another thread ...

    [quote]
    Quote Originally Posted by Dirty Ernie View Post
    He got BP to put up $20 bil in the face of a $75 mil statutory limit. No matter how ineptly the gov't distributes it, way more than $75 mil will reach the hands of those harmed. That's better than GWB did after God pissed on N.O. with Katrina. I don't think he got a dime outta the responsible party on that one.

    This is true on the surface. However, looking 'under the hood' reveals lots of unintended consequences.

    (snip)"it has not yet been established that BP is even to blame for the spill, and the law – which government wrote – limits its liability anyway to $75 million. That was the basis on which BP hunted for oil, and on which its owners invested their money. Now that it has voluntarily exceeded that limit by a factor of at least 267, who can ever trust its word again?

    The word of the Company, that is. The word of government has long ago been recognized as worthless, for if it finds any of its laws inconvenient (like the one that taxes the income only of those made legally "liable" for it) it will simply ignore them and do what it wants. We know that. But BP is not government. Is it?

    After a sleepless night worrying about all this, of which more below, I pulled up BP's Annual Report for 2009, to see if there's another way to look at this financial disaster.

    Perhaps things may not be quite as bad as they seem. The Company made sales of $246 billion in that year, of which $25.1B was "profit before taxation" – that's 10.2%, not bad. Then taxation by the world's governments confiscated $8.4B of it, or 33%. That left net, after-tax profits for shareholders of $16.7 billion or 88 cents a share.

    The Obamagrab means BP will cancel its remaining three 2010 dividend payments, and if 2010 is as good a year as 2009 (one source suggests it may not be) then three quarters of $16.7B is to be diverted from shareholders to the government's nominee. That's $12.5 billion.

    However, to obtain that sum BP has to earn pre-tax profits of (12.5 / 0.67 =) $18.7 billion, and the $20B payment will presumably come out of pre-tax profits. Accordingly, if BP ends up paying $20B, it will be "only" (20 – 18.7 =) $1.3 billion out of pocket this year. Plus what it will spend on a new rig, overtime, cleanup, and so forth. But the total may be no more than around 1% of its sales or a tenth of its profits. Nasty, but not crippling.

    What, meantime, will this plunder mean for Americans? – some 40% of BP's shares are held in this country, many of them on behalf of pensioners. So a few million seniors, dependent on hitherto reliable BP dividends, are going to run short this year; in effect, wealth will be transferred from them to younger, more active recipients on the Gulf Coast. I don't say that's wrong, mind; it's proper that owners of a company do the right thing by those it damages, but only to the extent that law or (far preferably) contract provides. Here, BP is having to buy favor in Washington by stiffing its owners. Like all Faustian bargains, the favor will be a phantom.

    Government transfers are never fast, and always expensive – the bureau-rats administering them always manage to skim off a rich layer for themselves – so those idled fishermen and hoteliers may have to wait a while. Some of them are already complaining that BP is too slow, and now that the Feds have the job of making payments, they will find out what waiting really means. That will increase hostility to Washington, and so is no bad result. One other potentially good result is that scrutiny of applications for money is likely to be poor (what do b-rats know about meeting small-business payrolls?). This $20 billion could prove a bonanza for all manner of malingerers and spongers, so rather than complain, why not join them?"(snip)

    from


    Put another way, of the $20 billion in funds that BP will be paying into 'escrow', the actual after-tax cost to BP as a company will only be 1.3 billion. At a 33% effective tax rate, this will also mean that BP will NOT be paying something like $6 billion worth of corporate taxes due to the 'deductibility' of spill cleanup costs ... $6 billion that will therefore have to be made up for by other US taxpayers.

    The balance will then come from 'non-payment' of dividend income to BP's shareholders ... some 40% of which are American - either individuals who were counting on that stable dividend income to fund present day retirement etc, or pension funds who were counting on that stable dividend income to fund future retirements. And ultimately US taxpayers may wind up picking up part of the tab on this as well ... either via increased social services costs as retirees exhaust their own resources more quickly, or via the gov't agency Pension Benefits Guarantee Corp being forced to make good on US pension fund losses.

    ~
    Last edited by Melonie; 06-19-2010 at 10:36 AM.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    A fine is NOT a business expense. Doesn't matter if BP is to blame or not as they are responsible. More LW BS speculation. Equity (and shareholder dividends) is subject to the whims of outrageous fortune. It happens to all of us.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    What the 20 billion on escrow really means is that people who depend on the gulf for their livelihood won't have to wait until the courts decide how much bp has to pay. If you don't think thats a huge deal then just let me point out the Exxon Valdez still has not been resolved.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    ^^^ yes it is obviously true that a US 'czar' administering payouts from the BP escrow fund will get settlement money into the hands of gulf coast businesses. The unknown element of course is just how many of those settlement dollars will actually be paid by BP, versus being paid by US and UK retirees, BP stockholders, huge pension funds, the US taxpayer etc.

    While it may be politically incorrect for Americans to question the Obama / BP deal that led to the 20 billion 'escrow' fund, the Brits certainly have no reservations ...


    (snip)"Barack Obama has been accused of holding "his boot on the throat" of British pensioners after his attacks on BP were blamed for wiping billions off the company's value.

    Experts have said that the clean-up costs of the oil spill will run to between £10 billion and £20 billion but the biggest cost to the company is from investors dumping stock for fear of BP being further punished by the US Government.

    Those fears have been heightened by Mr Obama's increasingly aggressive rhetoric towards BP, which some investors see as an attempt to deflect criticism of his own handling of the crisis. Last month, a White House spokesman said the President's job was to keep his "boot on the throat" of the company.

    In the past week, Mr Obama, who insists on referring to BP by its former name British Petroleum, has suggested that its chief executive, Tony Hayward, would have been sacked if he worked for him.

    BP's position at the top of the London Stock Exchange and its previous reliability have made it a bedrock of almost every pension fund in the country, meaning its value is crucial to millions of workers. The firm's dividend payments, which amount to more than £7 billion a year, account for £1 in every £6 paid out in dividends to British pension pots.

    BP is so concerned about Mr Obama's power to affect share value that it has urged David Cameron to appeal to the White House on its behalf. Downing Street, however, has refused to get involved. "We need to ensure that BP is not unfairly treated – it is not some bloodless corporation," said one of Britain's top fund managers. "Hit BP and a lot of people get hit. UK pension money becomes a donation to the US government and the lawyers at the expense of Mrs Jones and other pension funds." "(snip)

    from

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    also, outside US mainstream media, you also find politically incorrect analysis like this ...

    (snip)"Why BP will not survive

    By James G. Rickards

    There are two dynamics that BP bull analysts are missing, one political, one economic.

    The economic point is that analysts assume there is some quantum of damage, hard to quantify or know in the short run, but still essentially fixed. They then do their best estimates, compare the results to BP's balance sheet (including projected earnings over the next 5 years), make a judgment about BP's capacity to pay and their estimate of the franchise value and earnings potential net of the payments and then issue buy or sell recommendations at various market levels.

    But that's not how the world works.

    The damages are not fixed but moving in a critical state system with positive feedback loops. In layman's terms, the worse things get, the worse they will get. One year's compensation to a fisherman soon becomes two or three, etc. Soon getting comped by BP starts to feel better than fishing and who can argue? Ecologies change, vacation habits change, vocations change, etc. As long as BP has the money, there will be an irresistible dynamic to enlarge the claim until the money is gone.

    The political point is related but starts in a different place.

    Obama's approval ratings are getting close to those of Nixon, Carter and Bush 43. History shows that once you drop below 40% approval there is no recovery because you no longer have sufficient critical mass with which to reward friends and punish enemies.

    The economy is getting worse, not better. By election day 2010, unemployment will be higher, real estate prices lower and the banking crisis will be back (or, it never really went away).

    Obama hates the English. They tortured his grandfather in Kenya. His first official act as President was to order the packing up and return of a Churchill bronze bust which Bush had displayed in the Oval Office.

    Taking all of this into account, BP is an irresistible cookie jar into which politicians will reach their hands over and over. Again, the dynamic is not "how much do you owe?" but rather "how much can you pay?". The answer is that you keep paying until you're broke. They will also need to demonize BP on a continual basis as a prod to pass cap-and-trade or cap-and-tax and as a club to beat Republicans who stand in their way. Just look at what happened to Rep. Joe Barton (R-TX) today to get an idea of how this will pay out."(snip)

    from

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    It's sad for pensioners...but that's why stocks are called a risk. My mom lives off her investments 100%....and those are her words.

    Dividends are sharing of profits from GOOD years. If a company does well, share the wealth. If they do poorly, there may be nothing to DIVIDe (DIVIDe, DIVIDend...)


    I think the $75 M cap was a crock, but assumed oil companies were doing all they could, not skipping service cycles and failing to exercize valves...

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    Oh thats rich "we are not trying to protect the giant oil company, we just want to save the old people!".

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    [QUOTE=Melonie;1947475]originally posted by Dirty Ernie in another thread ...



    This is true on the surface. However, looking 'under the hood' reveals lots of unintended consequences.

    (snip)"it has not yet been established that BP is even to blame for the spill, and the law – which government wrote – limits its liability anyway to $75 million. That was the basis on which BP hunted for oil, and on which its owners invested their money. Now that it has voluntarily exceeded that limit by a factor of at least 267, who can ever trust its word again?
    How can anyone possibly suggest that it hasn't been established that BP is to blame?!

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    ^^^ I am sure that there are a couple of constitutional lawyers out there somewhere who will point out that there have been no serious investigations and no official findings of wrongdoing against BP to date. Also, oil well part owner Anadarko is not taking ANY responsibility !



    Please understand that I am not supporting BP. I am merely point out that once upon a time there used to be a legal principle in America of being 'presumed innocent until proven guilty'. In a way, what's happening to BP is analogous to busted dancers being 'railroaded' into accepting plea bargain arrangements with a misdemeanor sex crime being added to their permanent record.

    Actually, I am equally concerned that the 'apparent' settlement reached with BP in the form of the $20 billion escrow fund provides a misconception that BP corporation will truly bear the $20 billion cost, versus a de-facto $6 billion undocumented and involuntary contribution from US taxpayers ( as the result of BP paying $6 billion less in US taxes ).

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    and here's fresh news that confirms that BP will be able to take a tax write-off for every dollar of 'settlement' money it pays out ... because US 'settlement' money recipients will be taxed on the 'settlement' money instead !


    (snip)"NEW ORLEANS — Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.

    He never even considered putting some of it away for taxes.

    Now he's among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.

    Many were already angry about how long the oil giant took to cut the checks. So when they got the money — generally about a few thousand dollars each so far — they spent it fast.

    "If they're going to pay you a lump sum, like for a year, then bam, take the taxes out of the check," said Pellegal, of Boothville, La. "But a little bit at a time, they shouldn't."

    Accountants have been trying to nail down the implications for thousands of taxpayers after President Barack Obama said BP would create a $20 billion disaster fund and provide another $100 million for oil workers who lose their jobs because of the six-month moratorium on deepwater drilling in the Gulf of Mexico.

    Oil has been gushing into the sea since the rig Deepwater Horizon exploded April 20, killing 11 workers and triggering the worst oil spill in U.S. history.

    Tax experts said generally all income is taxable under federal law unless specific exemptions are approved by Congress or the Treasury Department — and neither has acted yet on oil spill damage claims."(snip)

    from

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    How can anyone possibly suggest that it hasn't been established that BP is to blame?!
    Dr. Thomas Sowell sums up this issue very concisely at


    (snip)"Just where in the Constitution of the United States does it say that a president has the authority to extract vast sums of money from a private enterprise and distribute it as he sees fit to whomever he deems worthy of compensation? Nowhere.

    And yet that is precisely what is happening with a $20 billion fund to be provided by BP to compensate people harmed by their oil spill in the Gulf of Mexico.

    Many among the public and in the media may think that the issue is simply whether BP's oil spill has damaged many people, who ought to be compensated.

    But our government is supposed to be "a government of laws and not of men."

    If our laws and our institutions determine that BP ought to pay $20 billion — or $50 billion or $100 billion — then so be it.

    But the Constitution says that private property is not to be confiscated by the government without "due process of law."

    Technically, it has not been confiscated by Barack Obama, but that is a distinction without a difference.

    With vastly expanded powers of government available at the discretion of politicians and bureaucrats, private individuals and organizations can be forced into accepting the imposition of powers that were never granted to the government by the Constitution.

    If you believe that the end justifies the means, then you don't believe in constitutional government.

    And, without constitutional government, freedom cannot endure. There will always be a "crisis" — which, as the president's chief of staff has said, cannot be allowed to "go to waste" as an opportunity to expand the government's power.

    That power will of course not be confined to BP or to the particular period of crisis that gave rise to the use of that power, much less to the particular issues.

    If the agreement with BP was an isolated event, perhaps we might hope that it would not be a precedent. But there is nothing isolated about it.

    The man appointed by President Obama to dispense BP's money as the administration sees fit, to whomever it sees fit, is only the latest in a long line of presidentially appointed "czars" controlling different parts of the economy, without even having to be confirmed by the Senate, as Cabinet members are.

    Those who cannot see beyond the immediate events to the issues of arbitrary power — vs. the rule of law and the preservation of freedom — are the "useful idiots" of our time. But useful to whom? "(snip)

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    Quote Originally Posted by Melonie View Post
    ^^^ yes it is obviously true that a US 'czar' administering payouts from the BP escrow fund will get settlement money into the hands of gulf coast businesses. The unknown element of course is just how many of those settlement dollars will actually be paid by BP, versus being paid by US and UK retirees, BP stockholders, huge pension funds, the US taxpayer etc.
    Suppose we let BP figure that one out, like good capitalists would. If BP doesn do good business in the face of this, maybe they won't survive. Stockholder take their risks like everyone else in business. I have no more concern over them than I do for, say, Kodak.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    About the confiscation thing...we could let this settle in the courts for decades or we can 'request' that BP do the right thing. If we care more about the law than what the law serves (people) we can burden the legal system for years and maybe some people would get a settlement before they die, and maybe not. For my own feelings, I vote for the people.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    I just think its REALLY freaking sad. This oil spill is ALREADY causing dozens of business where I live (2 parishes north of the coast line) to close due to shortage of seafood.. which has NEVER been a problem... A lot of South Louisiana DEPENDS on the seafood for their businesses.. whether it be the festivals, restaurants, fishermen, etc.. I REALLY hope these oil companies dont "bribe" off the judges somehow and these poor people dont get help...

    Recently BP offered the fishermen a $5,000 check for their "losses".. Wow, 5 K REALLY??? That doesnt even cover the fuel for their boats for a FEW months. What a slap in the face!!! It it just REALLY sad!!

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    Quote Originally Posted by Melonie View Post
    ^^^ I am sure that there are a couple of constitutional lawyers out there somewhere who will point out that there have been no serious investigations and no official findings of wrongdoing against BP to date. Also, oil well part owner Anadarko is not taking ANY responsibility !

    http://www.businessweek.com/news/201...-update2-.html

    Please understand that I am not supporting BP. I am merely point out that once upon a time there used to be a legal principle in America of being 'presumed innocent until proven guilty'. In a way, what's happening to BP is analogous to busted dancers being 'railroaded' into accepting plea bargain arrangements with a misdemeanor sex crime being added to their permanent record.

    Actually, I am equally concerned that the 'apparent' settlement reached with BP in the form of the $20 billion escrow fund provides a misconception that BP corporation will truly bear the $20 billion cost, versus a de-facto $6 billion undocumented and involuntary contribution from US taxpayers ( as the result of BP paying $6 billion less in US taxes ).
    BP is the one who owns and set up the drill. If they didn't install the drill there, this would never have happened. BP set up a drill that could potentially spill billions of gallons of oil in the Gulf if something went wrong, and they had no viable plan to fix it if anything did go wrong.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    Quote Originally Posted by Melonie View Post
    Dr. Thomas Sowell sums up this issue very concisely at http://www.investors.com/NewsAndAnal...-Tyranny-.aspx

    Those who cannot see beyond the immediate events to the issues of arbitrary power — vs. the rule of law and the preservation of freedom — are the "useful idiots" of our time. But useful to whom? "(snip)
    Thomas Sowell is a useful idiot for BP.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    I have no more concern over them than I do for, say, Kodak.
    well, there are arguably very big reasons why you should ... think Lehman Brothers !

    (snip)"The BP crisis in the Gulf of Mexico has rightfully been analysed (mostly) from the ecological perspective. People's lives and livelihoods are in grave danger. But that focus has equally masked something very serious from a financial perspective, in my opinion, that could lead to an acceleration of the crisis brought about by the Lehman implosion.

    People are seriously underestimating how much liquidity in the global financial world is dependent on a solvent BP. BP extends credit - through trading and finance. They extend the amounts, quality and duration of credit a bank could only dream of. The Gold community should think about the financial muscle behind a company with 100+ years of proven oil and gas reserves. Think about that in comparison with what a bank, with few tangible assets, (truly, not allegedly) possesses (no wonder they all started trading for a living!). Then think about what happens if BP goes under. This is no bank. With proven reserves and wells in the ground, equity in fields all over the planet, in terms of credit quality and credit provision - nothing can match an oil major. God only knows how many assets around the planet are dependent on credit and finance extended from BP. It is likely to dwarf any banking entity in multiples.

    And at the heart of it all are those dreadful OTC derivatives again! Banks try and lean on major oil companies because they have exactly the kind of credit-worthiness that they themselves lack. In fact, major oil companies, conversely, spend large amounts of time both denying Banks credit and trying to get Bank risk off of their books in their trading operations. Oil companies have always mistrusted bank creditworthiness and have largely considered the banking industry a bad financial joke. Banks plead with oil companies to let them trade beyond one year in duration. Banks even used to do losing trades with oil companies simply to get them on their trading register... a foot in the door so that they could subsequently beg for an extension in credit size and duration.

    For the banks, all trading was based on what the early derivatives giant, Bankers Trust, named their trading system: RAROC - or, Risk Adjusted Return on Credit. Trading is a function of credit bequeathed, mixed with the risk of the (trading) position. As trading and credit are intertwined, we might do well to remember what might happen to global liquidity and markets if BP suffers what many believe to be its deserved fate of bankruptcy. The Intercontinental Exchange (ICE) has already been and will be further undermined by BP's distress. They are one of the only "hard asset" entities backing up this so-called exchange.

    If BP does go bust (regardless of whether it is deserved), and even if it is just badly wounded and the US entity is allowed to fail, the long-term OTC derivatives in the oil, refined products and natural gas markets that get nullified could be catastrophic. These will kick-back into the banking system. BP is the primary player on the long-end of the energy curve. How exposed are Goldman sub J. Aron, Morgan Stanley and JPM? Probably hugely. Now credit has been cut to BP. Counter-parties will not accept their name beyond one year in duration. This is unheard of. A giant is on the ropes. If he falls, the very earth may shake as he hits the ground."(snip)

    (snip)"All the counter-party risk associated with the current BP situation means the term curve of the global oil trade has likely shut down. Here we have yet another credit-based event causing a lock-up in markets that will now impede trade and commerce. It looks like an exact replication of the 2008 credit market seizure could ensue all over again - and it could probably be a lot worse. The world is in a far more delicate state now.

    Although never really discussed, the world is highly reliant on BPs provision of long-term credit to many core industries. Who makes good on all the outstanding paper that so many smaller oil, gas and electricity companies, airlines, shipping companies, local bus, railway and transportation networks that rely on BPs creditworthiness and performance for? It doesn't take a genius to figure out how this could all unwind. If BP has to be bailed-out, like a bank, the system will have to print even more unimaginable amounts of money.

    The market, intellectually lazy and slow to realization, as it often is, probably has not woken up to it yet - but the BP crisis could unleash damage similar to the banking crisis. A BP failure through bankruptcy could make Lehman look small in comparison, and shake the financial house of cards we live in even more severely. If the implicit danger of the possibilities imbedded in such an event doesn't make an individual now turn towards gold at full speed, it is likely that nothing will."(snip)

    from

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    BP is the one who owns and set up the drill.
    Actually, BP is a PART owner in the well. Why isn't anybody going after 25% owner Anadarko that is based in Houston Texas, USA the way they are going after BP ?

    If they didn't install the drill there, this would never have happened.
    Actually, the well location was 'directed' by an agency of the US gov't. BP's preferred location was only in 200ft of water, but environmental protests scuttled BP's original permit request ... which led to the well eventually being approved for the 'mandated' 5000ft depth. So by your same logic, environmentalists and the US gov't are responsible for the location of the well not BP.

    BP set up a drill that could potentially spill billions of gallons of oil in the Gulf if something went wrong, and they had no viable plan to fix it if anything did go wrong.
    true, but true only if 20-20 hindsight is applied


    Again I am not trying to argue that BP is absent a whole lot of responsibility over this spill. All I am arguing is that somebody should be paying attention to the fact that the establishment of this 'escrow fund' is arguably unconstitutional, that the actual money being spent by this 'escrow fund' will not all come from BP, that under current tax law US taxpayers will ultimately wind up directly paying around 1/3rd of the tab ( to make up for BP's spill cleanup related tax write-offs ), and that under current law US taxpayers will wind up incurring a ton of secondary costs as well ( such as having to pay income tax on any 'settlement' money received).

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    Nobody forced BP to drill the well there. They could have decided it was too risky and not drilled at all.

    Part of running a business is preparing for wort-case scenarios. This is not the first time something like this has happened. They knew about the possibility. When I go on a cruise, the cruise ship has life-boats and provides all of the passengers with life preservers, and has drills to make sure everyone knows what to do in case the ship starts sinking. Even though it's very unlikely, the ship is prepared for such a scenario.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    Some one should have certified the well's safe operation. Some one should have set up a coalition of all oil well owers in the Gulf region to share technology, spill plans, and resources, like the way the firetrucks at an airport are set up. Who couldn'r predict a massive accident at some time? Likely politicians whose constituents are oil well dependent made sure that didn't happen.

    It is hard being an apologist for BP and MMS and whomever else that didn't plan rsponsibly for this. I am not going to worry about future implications to the offshore drilling contingent unless they get their act in gear.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

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    Default Re: what the 20 Billion Dollar BP 'escrow fund' is really likely to mean ...

    ^^^ well the offshore oil drillers are definitely getting their act in gear ... outside of US territorial waters





    The take-away from these announcements is that, after the way the situation has gone for BP, new future US offshore drilling operations will basically be flushed down the toilet. This in turn will result in any future oil leak / rig explosion incidents being confined to the coasts of Nigeria, Brazil, Venezuela, Cuba etc. rather than in US territorial waters. However, this will also arguably result in billions of dollars worth of lost oil royalties to US states, will result in the permanent loss of some 100,000 high paying US jobs, will result in probable 25%+ price increases for oil / diesel / gasoline, and will result in additional hundreds of billions of dollars per year exiting the US domestic economy via the replacement of domestic oil purchases with increased foreign oil purchases.

    In other words, the US offshore oil industry will now follow in the footsteps of the (former) US manufacturing industry. Or, more accurately, it will follow in the footsteps of the US nuclear power industry post 3 mile island, with zero new capacity being added and existing capacity slowly declining.


    Some one should have certified the well's safe operation
    A US gov't agency DID make such certification ... and even presented BP with a safety award ... right up to the point where the rig exploded it was considered a paragon of oil drilling virtue


    Some one should have set up a coalition of all oil well owers in the Gulf region to share technology, spill plans, and resources
    actually, US federal law specifically prevents such a coalition, since the Jones Act prevents any foreign built / foreigned crewed ships ( including skimmers, dredges, fire booms etc. ) from operating in US territorial waters. To wit, Shell / the Dutch gov't offered some of it's massive worldwide spill control resources to BP / the USA within 3 days of the rig explosion ... an offer that was specifically refused by the current US president. Similarly, BP's own worldwide spill control resources could not be brought to bear for the same reason.

    This is worth putting in extremely blunt terms. Had President Obama decided to waive the Jones Act ( which GWB did for Hurricane Katrina and which other former presidents have done in trying times ), an armada of skimmers, dredges, fire boom ships etc. could have been in the Gulf arresting the spread of the oil spill within two weeks of the original incident. Had President Obama decided to waive the Jones Act, in all probability the US Gulf states would NOT have oil on their beaches right now. Had President Obama decided to waive the Jones Act, many of the devastating costs - from cleanup to lost business revenues to lost fishing / tourist jobs - would NOT have occurred ( or at least would have been significantly less extensive / expensive ).

    In purely legal terms, BP could have very well raised the Jones Act issue in the context of 'yes we are 100% responsible for the original leak, but by preventing early remediation possibilities using available foreign built / foreign crewed ships a significant percentage of the resulting much greater costs of cleanup should be borne by those responsible for preventing that remediation' ... i.e. President Obama and ultimately the US taxpayer ! The purely legal situation is analogous to a local town refusing to allow the fire brigade from a neighboring town to attempt the dousing of a burning building that the local fire company was not equipped to handle ... and as a result allowing an entire neighborhood to go up in flames ... then afterwards attempting to hold the owners of the building where the original fire started responsible for damages to every other burned down building in the neighborhood.

    However, in all probability, BP $20 Billion 'settlement' fund agreement will keep any serious discussions of the Jones Act out of the US public eye. And as already mentioned in this thread, it will also keep the significant share of cleanup and other costs that will ultimately fall on US taxpayers out of the public eye as well.

    ~
    Last edited by Melonie; 06-25-2010 at 04:03 AM.

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