BP’s announcement on Wednesday that it will pay $20 billion into an escrow account may sound like a win for the USA and victims of the Gulf oil spill. In fact, it could be a powerful new tool for the White House’s political machine, and is the latest manifestation of the Obama administration’s willingness to work outside the law. It also lays bare Big Oil’s willingness to get cozy with the left.
There is no legal basis for the Obama administration to induce BP to pay $20 billion into a kitty to be controlled by one of its political appointees. While this may play well in populist circles, create the appearance of action, and was apparently easy to foist onto BP’s hapless management, it weakens the rule of law by essentially circumventing the law.
There is already a well-established legal process for remedying the economic cost of someone else’s negligence. Every day, thousands of Americans sue other individuals or companies, either by themselves or via class actions that combine their efforts. The design and rules of these legal processes are laid out in laws crafted by Congress and state legislatures.
BP’s $20 billion was extracted outside of this legal framework for reasons that have not been explained. There is a high risk that this fund will be doled out based on political, not legal criteria. Rather than judges and juries making decisions, an economic commissar will.
This fits the emerging pattern of lawlessness in Mr. Obama’s Washington. Before this, Exhibit A was the health care bill. The procedure by which it was passed, and its more novel provisions (e.g., compulsory insurance), were conjured with general disregard of the Constitution and legal and legislative norms.
More recently, Mr. Obama’s technology guru at the White House unethically used the power of his office to browbeat private businesses into offering him discounts.
And the man who will administer the new $20 billion fund, Kenneth Feinberg, is the government’s so-called “Pay Czar,” and has used questionable government power to dictate compensation levels for financial industry employees. Lost in this mess is any reference to limits on government set forth in the Constitution or law.
For its part, BP has done a great disservice to its shareholders. Despite its charitable pay-in to a Democratically-controlled kitty, the company can still be sued separately by anyone with a grievance.
Congress can theoretically change this so that compensation is managed through the fund.
But BP CEO Tony Hayward probably should have sought that before signing over his shareholders’ money. At present, the $20 billion has won BP no legal protection and amounts only to history’s most expensive P.R. move.
As time goes by, Mr. Hayward comes increasingly to resemble the character James Taggart in the Ayn Rand novel "Atlas Shrugged." Both men came to run mighty businesses created by more talented managers. Both were beguiled by cunning creatures of government who sought to bring wealth and wealth-creators under the heel of the state. James Taggart sought the love of the aptly named lobbyist-turned-economic-dictator “Wesley Mouch.” Hayward and his contemporaries throughout Big Oil crave a similar acceptance from those who plot their destruction, and on their way to that end, the erosion of the rule of law.
Indeed, it is a canard of the left that Big Oil is a bulwark of capitalism and private property rights that hinders the march of progressivism.
BP has sought cozy relations with liberal environmental groups. It has donated $10 million to the Nature Conservancy and $2 million to Conservation International.
It has a partnership related to wind power with groups like the Sierra Club, the Natural Resources Defense Council, and the Union of Concerned Scientists.
Other Big Oil giants play a similar game. In 2008-09, Chevron peppered Washington, D.C. subway stations with sanctimonious ads showing people vowing to lead green lifestyles and use less of Chevron’s own product.
Last year, Chevron’s CEO agreed in a debate with the Sierra Club’s executive director that there ought to be a new energy tax.
Currently, Chevron’s website on corporate social responsibility has a link to the left wing Human Rights Campaign, whose notable contribution to the 2004 presidential race was printing stickers declaring “George W. Bush: ‘You’re Fired.’”
All of this brings to mind Winston Churchill’s definition of an appeaser as “one who feeds the crocodile hoping it will eat him last.” So it is with those currently running Big Oil.
Unfortunately, they are not only victimizing their shareholders, but everyone else in the radical environmentalists’ cross hairs, including Americans who do things like drive cars and heat their homes in winter.
Two solutions are wanting. First, voters could use elections this November to elect a conservative Congress that starts insisting Mr. Obama respect the rule of law and the limits of constitutional government. Second, shareholders of oil companies could insist on a management able to focus more on long-term shareholder value--and political strategies smarter than attempting to appease enemies committed to their demise.
Otherwise, shareholders might suddenly find that those who are supposed to represent their interests have instead given $20 billion away to liberal politicians for nothing in return.
Christian Whiton served in the administration of President George W. Bush.
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Christian Whiton is the president of the Hamilton Foundation. He was a State Department senior advisor in the George W. Bush administration and a policy advisor on the Giuliani and Gingrich presidential campaigns. He is author of "Smart Power: Between Diplomacy and War" (Potomac Books 2013).