Recent disasters on Wall Street are directly attributable to the lax regulations and lax regulatory atmosphere of the regulatory agencies who go one step farther and don't even enforce the limp regulations still on the books. Instead regulators at the SEC spend their days watching porn. Meanwhile at the Minerals Management Service (MMS), instead of regulating the mines and oil rigs, they were having sex and cocaine parties with the employees of corporations they were supposed to be regulating!
Corporations spend millions of dollars on lobbyists whose purpose is to change the laws in order to reduce regulations on corporations. And then regulatory agencies under George W Bush were staffed by folks who were dedicated to non-regulation as a matter of principle. So what to do with all their free time spent not doing their supposed jobs? Why not party with the very folks you're supposed to be regulating or watch porn?
Norway demands that off shore oil rigs have a device which can remotely shut off oil flow if necessary. Dick Cheney decided that such a device, which would have shut off the flow of oil that is polluting the Gulf, was unnecessary on American oil rigs. The reason was that the device cost $500,000., a pittance compared to oil company profits. The following is from an article in the Wall Street Journal:
The oil well spewing crude into the Gulf of Mexico didn't have a remote-control shut-off switch used in two other major oil-producing nations as last-resort protection against underwater spills.
The lack of the device, called an acoustic switch, could amplify concerns over the environmental impact of offshore drilling after the explosion and sinking of the Deepwater Horizon rig last week.
The accident has led to one of the largest ever oil spills in U.S. water and the loss of 11 lives. On Wednesday federal investigators said the disaster is now releasing 5,000 barrels of oil a day into the Gulf, up from original estimates of 1,000 barrels a day.
U.S. regulators don't mandate use of the remote-control device on offshore rigs, and the Deepwater Horizon, hired by oil giant BP PLC, didn't have one. With the remote control, a crew can attempt to trigger an underwater valve that shuts down the well even if the oil rig itself is damaged or evacuated.
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Nevertheless, regulators in two major oil-producing countries, Norway and Brazil, in effect require them. Norway has had acoustic triggers on almost every offshore rig since 1993.
The U.S. considered requiring a remote-controlled shut-off mechanism several years ago, but drilling companies questioned its cost and effectiveness, according to the agency overseeing offshore drilling. The agency, the Interior Department's Minerals Management Service, says it decided the remote device wasn't needed because rigs had other back-up plans to cut off a well.
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Industry critics cite the lack of the remote control as a sign U.S. drilling policy has been too lax. "What we see, going back two decades, is an oil industry that has had way too much sway with federal regulations," said Dan McLaughlin, a spokesman for Democratic Florida Sen. Bill Nelson. "We are seeing our worst nightmare coming true."
In addition to catering to oil corporation demands for lax regulations and limp regulatory enforcement, the US extracts a relative pittance in royalties for US taxpayers requiring only 12.5% of oil company profits compared to 50% in Norway. Norway's Government Pension Fund is entirely funded by royalties from oil. But the US taxpayers receive a paltry sum from oil royalties while oil companies rack up record profits.
(1) A 2007 Government Accounting Office (GAO) report on Gas and Oil Royalties found:
"In fiscal year 2006, oil and gas companies received over $77 billion from the sale of oil and gas produced from federal lands and waters, and the Department of the Interior's Minerals Management Service (MMS) reported that these companies paid the federal government about $10 billion in oil and gas royalties. (Royalties are usually about 12.5 % to 16.7% of the final value.)
"Based on results of a number of studies, the U.S. federal government receives one of the lowest government takes (percentage of cash flow) in the world. Collectively, the results of five studies presented in 2006 by various private sector entities show that the United States receives a lower government take from the production of oil in the Gulf of Mexico than do states--such as Colorado, Wyoming, Texas, Oklahoma, California, and Louisiana--and many foreign governments." For example: The states above receive royalties of between 51% to 57%; United Kingdom: 52%; Norway: 76%; Australia: 61% and Alaska: 53%. (GAO-07-676R Oil and Gas Royalties, 2007)
The two most profitable US corporations were Exxon Mobil and Chevron making a combined total of $69 billion in 2009. Compared to these profits only about $7.6 billion went to the US Government (er, uh, TAXPAYERS) for oil, gas and coal royalties. US taxpayers are clearly getting the shaft while private corporations get record profits. But then when a disaster occurs as it did on Wall St and as it did in the Massey Energy mining disaster and the disaster in the Gulf, US taxpayers are called upon to spend billions bailing out the corporations or cleaning up the mess. Meanwhile, the oil companies tie up their portion of the expense in court. Recipients of damage claims for the Exxon Valdez disaster had to wait 20 years to collect and by then Exxon had managed to get the damages reduced to practically nothing and some of the claimants had already died. I predict that the same will be true for the disaster in the Gulf. By law (thanks to oil company lobbyists) the liability of the oil companies is only $75 million, and US taxpayers are on the hook for the rest which could mount up to $14 billion by some estimates. So when BP says repeatedly that they will pay all legitimate claims, don't you know that in the back of their spokesman's mind is the specter of prolonged court hearings and that $75 million limit?
With regard to the above referenced GAO report ...
"This report shows that the U.S. has one of the most lenient royalty collection systems in the world and calls into question whether taxpayers are getting a fair return for the resources they own," said Rep. Nick Rahall, D-West Virginia and chairman of the House Natural Resources Committee.
Bottom line... The industry buys our oil cheap and often pays us for it by giving some back... And only then when they feel like it. Sweet deal.
The information above only scratches the surface of royalty mismanagement and oil industry malfeasance. Given their past record, should we assume the oil industry has only our best interests at heart in the future?
One would think the issue of oil and gas royalty underpayment and payment abuse would be good political campaign fodder for Democrats this year but the silence is deafening. (Not so for the Republican enthusiasm for the Drill Here, Drill Now.) John McCain's recent epiphany on offshore drilling, with no stated restrictions, should land him straight in the cross-hairs.
Obama, should he decide to push the issue, can show his creds by touting his sponsorship of S.115 The Oil SENSE Act (01/2007). The bill called for the suspension of royalty relief, the repeal of certain provisions of the Energy Policy Act of 2005, and to amend the Internal Revenue Code of 1986 to repeal certain tax incentives for the oil and gas industry. (The bill died in committee.)
