Backgrounder on BP – and Oil Companies Generally
One feature of crises is that they give rise to articles like this one that give an awful lot of background that never seems available when the crisis is over. Given that the cabal closed down investigative reporting in the United States during the Bush years, it’s good to see it down starting up again.
Thursday 17 June 2010
How taxpayers are subsidizing BP’s disaster through the pentagon.
Residents of Louisiana, Mississippi, Alabama, and Florida are livid with BP in the wake of the massive, never-ending oil spill in the Gulf of Mexico — and Barack Obama says they ought to be. But there’s one aspect of the BP story that most of those angry residents of the Gulf states aren’t aware of. And the president hasn’t had a thing to say about it.
Even as the tar balls hit Gulf beaches, their tax dollars are subsidizing BP and so far, President Obama has not shown the slightest indication that he plans to stop their flow into BP coffers, despite the recent call of Public Citizen, a watchdog group, to end the nation’s business dealings with company. In fact, the Department of Defense, which has a longstanding, multi-billion dollar business relationship with BP, tells TomDispatch that it has no plans to sever current business ties or curtail future contracts with the oil giant.
In recent weeks, against a news backdrop of oil-soaked pelicans, President Obama has been talking tough. “We’ve ordered BP to pay economic injury claims, and we will make sure they deliver,” he announced on June 1st. Days later, he rebuked the oil giant for considering plans to pay out large dividends to shareholders and for spending tens of millions of dollars on an advertising campaign to repair the company’s tarnished image.
“My understanding is that BP had contracted for $50 million worth of TV advertising to manage their image in the course of this disaster,” the president said. “Now, I don’t have a problem with BP fulfilling its legal obligations. What I don’t want to hear is that they’re spending that kind of money on shareholders and spending that kind of money on TV advertising, [but] they’re nickel-and-diming fishermen or small businesses here in the Gulf who are having a hard time.”
As part of his ongoing attempt to deal with flak from critics who claim that his reaction to the disaster in the Gulf of Mexico has been far too measured and that his administration has mishandled its response to the disaster, Obama told NBC “Today Show” host Matt Lauer: “I don’t sit around just talking to experts because this is a college seminar. We talk to these folks because they potentially have the best answers, so I know whose ass to kick.”
While the president has been on the verbal warpath, the U.S. military has — with little notice — continued to carry on a major business partnership with BP, despite the company’s disastrous environmental record.
As an institution, the Pentagon runs on oil. Its jet fighters, bombers, tanks, Humvees, and other vehicles burn 75% of the fuel used by the Department of Defense. For example, B-52 bombers consume 47,000 gallons per mission, and when an F-16 fighter kicks in its afterburners, it burns through $300 worth of fuel a minute. In fact, according to an article in the April 2010 issue of Energy Source, the official newsletter of the Pentagon’s fuel-buying component, the DoD purchases three billion gallons of jet fuel per year.
Thanks to the wars in Iraq and Afghanistan, the Department of Defense has been consuming vast quantities of fuel. According to 2008 figures, for example, U.S. military bases in Iraq and Afghanistan used a staggering 90 million gallons per month. Given the base-building boom that preceded President Obama’s Afghan surge, the 2010 figures may be significantly higher.
In 2009, according to the Pentagon’s Defense Energy Support Center (DESC), the military spent $3.8 billion for 31.3 million barrels — around 1.3 billion gallons — of oil consumed at posts, camps, and bases overseas. Moreover, DESC’s bulk-fuels division, which purchases jet fuel and naval diesel fuel among other petroleum products, awarded $2.2 billion in contracts to support operations in Iraq and Afghanistan last year. Another $974 million was reportedly spent by the ground-fuels division, which awards contracts for diesel fuel, gasoline, and heating oil for ground operations, just for the war in Afghanistan in 2009.
The Pentagon’s foreign wars have left it particularly heavily dependent on oil services, energy, and petroleum companies. An analysis published at Foreign Policy in Focus found that, in 2005, 145 such companies had contracts with the Pentagon. That year, the Department of Defense paid out more than $1.5 billion to BP alone and a total of $8 billion taxpayer dollars, in total, to energy-related firms on what is a far-from-complete list of companies.
In 2009, according to the Defense Energy Support Center, the military awarded $22.5 billion in energy contracts. More than $16 billion of that went to purchasing bulk fuel. Some 10 top petroleum suppliers got the lion’s share, more than $11.5 billion, among them big names like Shell, Exxon Mobil and Valero. The largest contractor, however, was BP, which received more than $2.2 billion — almost 12% of all petroleum-contract dollars awarded by the Pentagon for the year.
While one exceptionally powerful department of the federal government has been feeding money into BP (and other oil giants) with abandon, BP has consistently run afoul of U.S. government regulators from the Occupational Safety and Health Administration (OSHA). According to the Center for Public Integrity, “BP account[ed] for 97 percent of all flagrant violations found in the [oil] refining industry by government safety inspectors over the past three years.” Records obtained by the Center demonstrate that between June 2007 and February 2010, BP received a total of 862 citations, mostly for alleged violations of “OSHA’s process safety management standard, a sweeping rule governing everything from storage of flammable liquids to emergency shutdown systems.” Of these citations, 760 were considered “egregious willful,” which OSHA defines as a violation even more severe than those committed due to “plain indifference” or evidencing “intentional disregard for employee health and safety.” As a result, BP faces $90 million in penalties which the company is currently contesting.
Over those same years, BP received around $5.7 billion in federal contracts, according to official government data. In fact, the $2.2 billion the Pentagon paid to the oil giant in 2009 accounted for almost 16% of the company’s nearly $14 billion in annual profits.
This fiscal year, the U.S. military has already awarded the company more than $837 million, inking its latest deal with BP in March.
The Pentagon’s Green Revolution
In recent years, the gas-guzzling Pentagon has launched a major effort to invest in developing green technology — or at least give the appearance of doing so — with, at best, mixed results. As defense-tech writer Noah Shachtman has pointed out, the military is “now focusing on algal feedstock for biofuel and next-generation solar panels. One of the world’s largest solar-power projects is planned for the Army’s main training center, at Fort Irwin, Calif. Billions in stimulus money were spent to green military facilities.”
But efforts in the Bush years to develop “green” vehicles generally stalled, flopped, or barely got rolling. Under the Obama administration, more ambitious goals have been set, but tangible results are still lacking. Last year, the military’s contracts for renewable fuels derived from algae, according to DESC, added up to less than 22,000 gallons.
One major reason for this, Shachtman writes, is that “the current systems for delivering power and fuel to war zones are reliable, if inefficient and unsustainable. Military leaders,” he adds “don’t want to jeopardize operations in Afghanistan or Iraq for something perceived as experimental or risky.” As a result, whatever solar panels it has installed or renewable jet fuel it has purchased, the Pentagon remains dependent on buying huge amounts of petroleum products from BP and other large energy corporations, and when it comes to war-making, any substantive reduction in oil dependence appears far off indeed.
Nonetheless, the Department of Defense has devoted significant resources to publicizing its green efforts. The commander-in-chief has even lent a hand. On March 31st, President Obama stood in front of a “green” F-18 Hornet fighter designed to run partly on bio-fuels and announced to the nation that he was proposing to open large new areas off the Atlantic coastline, the eastern Gulf of Mexico, and the north coast of Alaska to oil and natural gas drilling. Less than a month later, the Deepwater Horizon oil rig exploded in the Gulf of Mexico.
In the weeks since, despite Obama’s tough talk, his reported “anger and frustration,” and his efforts to identify the proper “ass to kick,” as well as the Pentagon’s much-touted green-energy initiative, the U.S. military continues, as Shachtman points out, to burn “22 gallons of diesel [fuel] per soldier per day in Afghanistan, at a cost of more than $100,000 a person annually.”
In other words, as a direct result of war-making in distant lands, taxpayer dollars, including those from Florida, Alabama, Mississippi, and Louisiana, will continue to flow into BP coffers, even as more wildlife dies, more beaches are fouled, and more livelihoods are lost in the Gulf of Mexico.
Tough Talk and No Action
In a June 5th email message to supporters, paid for by Organizing for America, a project of the Democratic National Committee, President Obama again acknowledged the severity of the BP disaster and validated the anger it has unleashed. “This spill,” he declared, “has not just damaged livelihoods. It has upended whole communities. And the fury people feel is not just about the money they have lost. It is about the wrenching recognition that this time their lives may never be the same.”
“We have,” he continued, “…ordered BP to pay economic injury claims, and this week, the federal government sent BP a preliminary bill for $69 million to pay back American taxpayers for some of the costs of the response so far.”
Two days later, Tyson Slocum, the director of the consumer advocacy group Public Citizen’s energy program, sent a letter to Obama and Secretary of Defense Robert Gates asking them to go further. He urged them to suspend, and ultimately debar, BP and its subsidiaries from serving as defense contractors, to terminate six current federal contracts with the company, and prohibit BP and its subsidiaries from winning federal contracts for the next three years. He wrote:
“Given the company’s willful transgression of U.S. laws, it can no longer be presumed that BP will responsibly perform its contractor responsibilities. The demonstrated disregard for the law means that there is good reason to doubt that the company will abide by its obligations under its Department of Defense contracts. Moreover, the company’s repeated violation of environmental laws suggests an unacceptably high likelihood that BP will violate such laws in carrying out its contractual obligations. BP’s aggregate record of wrongdoing — including but not limited to causing the ongoing gusher in the Gulf of Mexico — evidences a lack of business honesty that seriously and directly affects its ability to perform its contractual duties.”
Public Citizen has yet to receive a response or any indication that the president or the defense secretary has read the letter, Slocum informed TomDispatch this week.
“I am not aware at this moment of any plans to curtail or cancel any DoD contracts that may exist at this time,” Department of Defense spokesperson Cheryl Irwin told TomDispatch. Irwin also stated that she knew of no plans to restrict the awarding of future contracts to BP.
The president has remained silent on the issue. Repeated requests by TomDispatch for comment from the White House’s Council on Environmental Quality went unanswered. In a statement to TomDispatch this week, however, the Environmental Protection Agency (EPA) said it “is closely monitoring the investigations into the circumstances leading to the explosion and spill at the Deepwater Horizon facility. EPA will weigh its options under our debarment authority and take appropriate actions.” No time frame, however, has been set for any type of decision. “It is really premature to speculate on the Agency’s actions,” an EPA official, who asked not to be named, told TomDispatch. “We’re on hold pending the larger federal investigation.”
Yesterday, the White House and BP agreed that the oil giant would establish a $20 billion escrow account to compensate claims resulting from the Gulf Coast oil spill. “This should provide some assurance to small business owners that BP is going to meet its responsibilities,” said President Obama following the announcement.
The message is clear. BP will be held accountable — but only to a point, and not nearly in strong enough terms, says Public Citizen’s Slocum. The escrow account is “a no-brainer,” he told TomDispatch. “But that’s just related to the company’s obligations to pay for a mess it created,” he pointed out, likening the situation to an individual breaking the law. “If I commit a crime that causes damage, I don’t just pay restitution. I pay a punitive fine or I’m incarcerated. The question is: What is the version of incarceration for corporations?”
Slocum sees a 2007 guilty plea by BP Products North America for a felony violation of the Clean Air Act — stemming from a 2005 explosion at a BP refinery in Texas that killed 15 workers — as evidence that stronger sanctions are now warranted. The fine resulting from the Texas disaster was just a “blip on their balance sheet,” he says.
“You have to send a clear message to shareholders that committing felonies is not tolerated in the United States. And the way you do that is through some form of permanent sanctions.” Barring the company from government contracts, says Slocum, would be just such a step.
With anger boiling over in the Gulf, there seemingly could be no more egregious offender or more deserving “ass to kick” than BP’s. “I don’t know of any other oil companies operating in America that are currently on criminal probation,” says Slocum. “I don’t know any other oil companies that recently pled guilty to a felony. I don’t know any other oil companies that appear to have committed numerous acts of negligence that resulted in the largest industrial environmental disaster in American history. BP is an outlier, so it needs to be treated as an outlier.”
Somebody should tell the president. Again.
Nick Turse is the associate editor of TomDispatch.com. An award-winning journalist, his work has appeared in the Los Angeles Times, the Nation, In These Times, and regularly at TomDispatch. He is the author of The Complex: How the Military Invades Our Everyday Lives (Metropolitan Books). His website is NickTurse.com.