BP Further Hardens Its Position

The media narrative on BP’s global deal-making spree remains fairly conventional: When the oil giant sells billions in North American assets, it’s raising capital for its spill liability; when it makes multi-billion-dollar deals in Russia or India, it’s just getting its corporate “life” back to normal.

Not unexpectedly, some of us who have engaged in protracted litigation with major oil companies (referred to as simply the “majors” in industry-speak) might propose something a little more cynical and even sinister. Unlike the U.S. Congress or its various oversight agencies, Big Oil leaders did indeed learn from the Exxon Valdez spill and other similar disasters. They may not plan ahead to protect the environment or cleanup workers, but they certainly take a scorched-earth approach to limiting corporate liability.

Remember in the early days of the BP spill when it was widely suggested that U.S. authorities seize BP’s assets? And it seemed perfectly logical to suggest that the spill might bankrupt the company, and some wondered if the London-based business was shielded by its “separate” North American and U.S. operating companies. As it turns out, the seizure of assets was all bluff, of course, since Congress has not passed a single spill-related measure, and even the presidential commission on the disaster was denied subpoena power.

But, just like real people, Big Oil executives react to near-death experiences when it comes to their companies.

So what we are likely seeing now is BP shifting its global position to be less, shall we say, accessible, by U.S. courts. We’ve already seen BP divest itself of the Texas City refinery where a 2005 explosion killed 15 and injured more than 170. About $7 billion in North American assets went to Apache Corp., and another major California facility was sold with the Texas City package. And let’s not forget that it’s extremely difficult for our government to seize a company’s assets in places like Russia and India (two places where BP has recently struck enormous deals).

Meanwhile, BP gets stronger every day. Oil is on its way to $100 per barrel. And remember the oil giant didn’t really create a $20 billion claims fund. Company executives merely pledged that amount and contributed the down payment of $5 billion, which still hasn’t been fully paid out to victims.

The company is moving into a position where it can afford to play a little hardball, and we’re seeing it begin now.

Reporter Mark Schleifstein at the Times-Picayune tells of one hardline position this week: “…BP has reneged on promises made in November to negotiate early payments to Louisiana to help rebuild oyster beds, repair damaged wetlands, and build a fish hatchery to allow the state to respond immediately to the collapse of commercial fisheries in the wake of the BP Gulf oil spill, state officials said Monday.”

Department of Wildlife & Fisheries Director Robert Barham told the TP that the state will instead scramble to find millions of dollars to begin the work itself, then bill BP for the costs. But Barham also noted a shift in the company’s strategy, saying BP has “…clearly moved from a public-relations strategy to one focusing on litigation over whether damage to the state’s oyster beds was BP’s fault. The state contends that its decision to open many freshwater diversions along the Mississippi River to full blast at the height of the oil spill kept oil from entering the oyster beds, though the fresh water killed the oysters, requiring the beds to be restocked with cultch, oyster shell deposited beneath the water on which oyster larvae [attach and] grow.”

We see BP’s hardening stance in daily news coverage. Three recent messaging points jump out: (1) The claims process is too generous; (3) There’s plenty of ways sick cleanup workers could have contracted illnesses (aside from cleanup work); and (3) Conducting a full cleanup of beaches might be too risky.

BP seems to have completely cast aside its promise to “make it right” and is instead going into bunker mode as it prepares to do battle in the courts.

BP feels it has dodged the bullet, and to a large extent it has done just that. The U.S. regulatory agencies have remained allied with the corporation, and Congress has done nothing. So now the shift is to the courts, and you can expect the “lawsuits might bankrupt BP” messaging to arrive any day now.

Even after two decades of watching this process play out, it still amazes me what Big Oil will actually do to protect its profits. And watching it restructure global energy just to screw victims out of their rightful payments is just the same old story on a grand scale.

See the Times-Picayune story on how BP reneged on its promise here: http://www.nola.com/news/gulf-oil-spill/index.ssf/2011/02/bp_reneges_on_deal_to_rebuild.html

Catchup on BP’s huge deal in India as reported by the Associated Press: http://www.miamiherald.com/2011/02/21/2077615/bp-signs-72-bln-deal-with-reliance.html#ixzz1EgZBBmrM

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