Can Obama seize BP assets?

 "Barack Obama will order BP to hand over control of damage claims arising from the oil spill in the Gulf of Mexico, his spokesman said today as the company was granted permission to try a new method of containing oil from the spill.

The US president is to give a televised address to the country tonight, his first from the Oval Office during his presidency, to reassure Americans that the government is in control of the crisis.

Obama's spokesman, Robert Gibbs, said the president was poised to seize the handling of damage claims from BP, if necessary. He would also use the speech to identify a person to lead the recovery effort and discuss reducing the US's reliance on fossil fuels and imported oil."  Guardian

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I want to see BP pay for it - all of it.  that would be an enormous sum.  There are direct costs of the clean up and then there are costs to individuals and businesses in lost income.  Those costs will continue for years.  Then there are costs to the state governments concerned in lost tax revenue from businesses damaged and tourists that wil have disappeared from the Gulf coast area.

Mr. Gibbs says that the US has the legal power to force BP to disgorge all that money.  Is that true?The US has a long standing tradition of resistance to ex post facto legislation.  Would some form of impoundment of BP's assets stand up in federal courts?  BP is an international company with a European base.  Why do we not think that BP would transform itself in some way to limit liability ans salvage assets for the benefit of stockholders?  They said they will pay for everything?  Don't be amusing.  These are businessmen about whom we are talking, not "grunts" on a ridgetop in Afghanistan.  Business is not about sacrifice, honor and service.  It is about making money.  It looks as though BPs liabilities in the Gulf region are virtually unlimited.  They will try to escape from that.  pl 

http://www.guardian.co.uk/environment/2010/jun/15/obama-bp-oil-spill-claims

Comments

[Nick]

Agreed- Obama should seize all domestic BP assets NOW, not later. In addition, BP should be barred from doing business in the U.S. That should send a powerful signal to the rest of the industry.

[Adam L. Silverman]

Sir,

Under existing legislation, which was used by the Nixon Administration in a similar environmental mess if I recall correctly, the US government has the right to do this if they so choose. I do not recall the specific law that was invoked at the time.

Additionally former Labor Secretary Reich has argued that the President has such authority under the 1990 Pollution Control Act. He has written about this both at his own website and cross posted at Salon:
http://robertreich.org/post/691559649/why-the-united-states-still-cant-get-bp-to-do-whats

[Fred]

The US operations will be placed into chapter 11 and the recovery, though in the tune of a few billion, will be essentially nothing compared to the actual economic damages encurred. (I wonder what all those politicians demanding the auto companies go into CH-11 will say?)

The Gulf has been affected for at least a generation. This is worse than the Love Canal or Chernobyl and it is still going almost full bore. The only difference from another tragedy, Bophal, is the death toll; but look what they got 26 years later:
http://lefarkins.blogspot.com/2010/06/2-years-for-20000-lives-26-years-later_5725.html

[ked]

The whole matter strikes me as a fairly straightforward National Security issue... a critical energy source threatened, the impact of crude oil to our shores where are located many of our most critical military facilites.

Seems that Obama could invoke some of the many broadly-written powers that the Presidency has accumulated since WWII.

In other words, "Socialism? I'll show ya some Socialism!" Or, replace Socialism with Nationalism, if that's your style of tea.

[Andy]

Nothing is very clear on these issues, but the following Congressional Research Service Reports provide good summaries of the various issues (both are PDF files):

http://assets.opencrs.com/rpts/RL33705_20100430.pdf

http://www.fas.org/sgp/crs/misc/R41262.pdf

[JohnH]

"Barack Obama will order BP to hand over control of damage claims arising from the oil spill in the Gulf of Mexico."

AKA TARBP: a sleight of hand to socialize the costs and bail BP out.

Obama is not about solving problems, only finessing them.

[b]

BP CEO Tony Hayword will just faint in congress when questioning gets tough and when he wants to avoid answers.

Petreaus just set the example. (Is he still fit for command?)

On the legal stuff I seriously doubt that Mr. Gibbs is right. There will be a legal fight over this and BP isn't alone in that fight. If it is BP today then it is Exxon tomorrow.

BP can not agree to unlimited coverage for dubious claims without an active ability to fight those claims. And yes, a lot of claims will be dubious.

Just ask Iraq about all those claims from Kuwait after Saddam got kicked out from there. Tens of millions for Coca Cola for allegedly missed business ...

There will have to be some compromise. A board with half government, half BP and a judge on top checking all claim categories and setting standard rates. A bureaucracy behind them to work through single claims and a way to escalate to normal courts from there.

There will also have to be some sort of escrow account, probably in the form of a foundation, to avaoid the limited corp hole BP could otherwise use. There are examples for this for the asbestos claims.

[par4]

re ex post facto; We used to,after retroactive immunity for the telecoms not so much.

[John Badalian]

Colonel Patrick - The British appear to be very defensive, even thin skinned, regarding this whole sorry BP episode. Do you think that British Politicos will use this affair as the opportunity to disentangle themselves from Af/Pak? Thanks! JB

[J]

Colonel,

The President IMO needs to 'nationalize' ALL British Petrol assets within all U.S. jurisdictions it is operating in. And when it is all settled then bill the Queen of England for any remaining remunerations since British Petrol is owned by the Queen of England. If it was up to me I'd bill the Queen for $50 Trillion, $1-3 Trillion for all the damages that her British Petrol is causing U.S., and for the remaining $47 Trillion for all the heartache her banking agents have caused U.S. since 1913.

BP operates here in oil patch, and you should hear all the cussing by local land owners. BP has their pretty little planes buzzing the underground pipelines for leaks, problem is when a land owner notifies BP that they do have a leak or there is a 'problem' with one of their pipes, it falls upon BP's deaf ears.

Why we let a 'foreign' company like British Petrol who allegiance is to a foreign entity, operate on U.S. soil. Especially when oil/gas/gasoline refining fall within the critical realm of "U.S. national security'. What I understand is that BP assets operating with U.S. jurisdictions is in the $1 to 3 Trillion range.

[greg0]

Robert Reich has been writing about BP lately and recommending a 'temporary receivership':

"As citizens, we want the hole in the Gulf plugged up as fast as possible, we want the spill contained, and we want everything cleaned up and damages paid -- no matter how much it costs BP's shareholders. But if we're BP shareholders, we want to minimize all such expenditures -- including our long-term liabilities.

Get it? There's no conflict between Britain and the United States. The conflict is between two kinds of interests -- shareholder interests and citizen interests.

And unless or until citizenship interests predominate in the Gulf -- unless or until BP's shareholders are forced by law to part with their assets to ensure the safety of the American public -- shareholder interests will come first. That's why it's so important for the Administration (and, if necessary, Congress) to take steps to put BP America under temporary receivership, establish an escrow fund of at least $10 billion that BP must pay into, and whatever else is necessary to trump shareholder interests."

http://www.huffingtonpost.com/robert-reich/bp-strawmen-wont-fix-the_b_612001.html

[Walrus]

BP's technical risk management practices have clearly been demonstrated to be abysmal.

I guess we are all wondering if their legal and financial risk management capability is as good as Exxon. A cynic like me thinks that lawyers are probably a cheaper risk management tool than requiring technical excellence.

Experience suggests that if they are as smart as Exxon, claimants will die of old age without seeing a cent of compensation. I would imagine that BP has had lawyers working continuously on the subject of its liabilities since the day of the explosion.

Furthermore, expect a legal and financial defence in great depth. For example, the "part" of BP that may eventually be held accountable may prove to have very limited available assets.

Exxon's Five billion dollar fine referred to in this 2008 article was reduced to Five hundred million by the Supreme Court. Litigation has taken Eighteen years:

"ExxonMobil paid a total of $3.5 billion in clean-up costs, fines and compensation but has still not paid the $5 billion in punitive damages a jury awarded back in 1994.

As far as ExxonMobil's Ken Cohen is concerned the company has done its bit.

"The issue is should further punishment be meted out on ExxonMobil in this instance, and we believe and the business community in this country believes the answer is no," said Mr Cohen.

Stanford University law professor Jeff Fisher is representing the Alaskans in the US Supreme Court.

"Exxon obviously doesn't want to pay any money and obviously is going to make every argument available to it under the law to delay that. Every day that Exxon doesn't pay this judgement it is better off than the day before," said Professor Fisher.

At appeal, the damages were reduced to $2.5 billion, and now Mr Maxwell and his fellow plaintiffs fear they just can't beat big business.

"Exxon says that everything is coming back, everything is fine, the fishermen have been paid, but it is a lie, it is an absolute lie. We have no trust for our corporations and our law system," said Mr Maxwell.

The Supreme Court is expected to come back with a decision before it shuts up shop for its summer break at the end of this month."

http://www.abc.net.au/news/stories/2008/06/10/2269642.htm

[BarmyArmy]

How about Halliburton?
They're the guys who actually cemented the well.
Can't they chip in a bit as well?

[jonst]

Well, I'm a lawyer, but this is out of my area of expertize, for the most part. OTOH......

I did represent the state of Maine in the AG's case against the tobacco companies. (as a junior member of the legal team it should be noted, this came early in my career)

And I did work on the issue of Phillip Morris essentially becoming the Altria Group, and international company for fear of the, generally speaking, the same issues the Col raised in his post. And we also looked at going after BAT, British American Tobacco, on the issue/s of disgorgement.

Without going into complex details that I have long forgotten now (this was 12 years ago) my sense is it would be very difficult to go after (to seize something) them prior to some kind of fine or legal judgment.

It would last forever and it would be the lawyers 'full employment act'.

Now, if you could get a RICO charge against them, which I doubt you could, but if you could, the govt would have a lot more options. See http://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act

But RICO is another world.....few specialists, very confusing law.

My guess is they, BP, will weasel out of full reimbursement. It's sort like COIN dynamics...BP just has to keep the fight going....like Exon did for 20 plus years. The other side tires out. The passions burn out and soon it becomes a dry legal case and that is where big players love to be. New govt officials come in...new judges, new theories of law, new case law holdings. Just hold out...don't lose, till the other side has had enough.

I will add, for what it is worth, if Obama does try this this will ty up the Admin from now until its last day in office. Whatever that is. If they are call him a socialist now....if they are running commercials like this now,

http://andrewsullivan.theatlantic.com/the_daily_dish/2010/06/the-tea-party-back-and-forth.html

What the hell is going to be like if he 'seizes' a corporation? Nah, I think we're F'd. The best we can do is pony up some money for the people affected and hope and pray that some of it even reaches them. And I have my doubts about that.

I guess you might get a hint about how I feel these days about the nation. Utterly depressing, and sad, but there it is. Like the picture of the wildlife. But who is going to 'wash' our Republic.

It was a Republic designed, to a great extent, by aristocrats, to be a partial Aristocracy. I mean those terms in a positive sense to the extent people believe that is possible. But how do you have an Aristocracy without aristocrats? Look at what passes these days for Aristocratic? Can you even have one Aristocratic, in public life, in this 24/7 new/entertainment cycle?

Well...I will stop. Sorry for going on so long. Today we have John Edwards like people, to a great extent. Cept Edwards got caught.

[Walrus]

J:

"Why we let a 'foreign' company like British Petrol who allegiance is to a foreign entity, operate on U.S. soil. Especially when oil/gas/gasoline refining fall within the critical realm of "U.S. national security'. What I understand is that BP assets operating with U.S. jurisdictions is in the $1 to 3 Trillion range."

Would you like other national Governments to apply your same standards to American companies? Exxon extracts oil here and General atomics mines some of our uranium.

[Andy]

Question to all those who think the Fed's can/should seize/nationalize BP's assets: What about the fifth amendment?

I agree that BP should be made to pay every penny even if that leads to BP's insolvency and demise, but I don't see how the executive has the authority to unilaterally seize those assets without due process.

[BillWade]

We've been hearing for 60 years about "ending our depencence on foreign oil" only to find out we're sitting on top of the world's largest oil field, lie #1.

I think tonight Obama will reinvigorate the Tea Party Movement tonight singlehandedly.

Air quality is going down, when will the evacuations begin? 4000 volunteers, including 300 ship captains from the Keys are saying, "we're going to clean up this mess in spite of BP and are not going to let them get in our way".

I figure when it hits the huge population area of Tampa/St Pete/Clearwater it will get very nasty.

[John Howley]

BP must have its liabilities converted into some limited and predictable formula or else it may go bankrupt or otherwise. The company has a huge projected cash flow so it's pretty valuable as a going concern.

On the other hand, if Obama lets them off too lightly, the voters will punish him. Tough call.

http://tinyurl.com/2d522sx

[Roy G]

BP has certainly shown a pattern of willful neglect of safety and environmental regulations, so this is far from an 'Act of God' as Texas Gov. Rick Perry tried to spin it. Here's a report on the state of their Alaska operations.

http://www.alaskadispatch.com/dispatches/energy/5396-inspectors-say-bps-alaska-pipeline-needs-attention-

Despite their horrific record, they now want to deep water drill in the Arctic. How could the Deepwater Horizon spill be worse? If it were encased under ice for 6 months.

Here's an idea: how about a national oil company? They seem to work pretty well.

[graywolf]

"Business is not about sacrifice, honor and service. It is about making money. It looks as though BPs liabilities in the Gulf region are virtually unlimited. They will try to escape from that. pl "
As they should.
BP's only obligation is to the shareholders.
Then, terrible management destroys shareholder value and the shareholders are out their money.
Management will escape - with their deals (like Lehman and Bear Stearns) intact.
Capitalism at work.
I am a Darwinian and unreconstructed capitalist.
BTW, I just bought a bunch of BP.
"When there's blood in the streets, buy."

[J]

Walrus,

I sadly agree with jonst's posting of "I think we're F'd. The best we can do is pony up some money for the people affected and hope and pray that some of it even reaches them. And I have my doubts about that. "

[J]

Walrus,

The only way I could think of that would give the BP perps an 'incentive' to pony up and pay they way they should, would be to manhandle them the same way organized crime handles an outstanding debt. Send in hunter-killer teams and scare the beejeez out of them.

[-bwg]

Robert Reich, secretary of labor under President Clinton, has been blogging on that at http://robertreich.org/ and specifically addresses the legal justification in http://robertreich.org/post/655678383/putting-bp-under-temporary-receivership-some-qs-and-as

He thinks it can be done under the Oil Pollution Act of 1990:

Q: Under what legal authority could the President take control of BP’s North American operations?

A: Obama has implicit authority through laws and regulations dealing with offshore drilling, especially the Oil Pollution Act of 1990. By analogy, if a nuclear reactor were melting down, the President would use his regulatory authority over nuclear energy to take temporary control over the plant and the relevant parts of the corporation that ran it. President Truman seized the nation’s steel mills in 1952, arguing that the emergency of the Korean War necessitated it. (The Supreme Court ultimately blocked him but according to Justice Jackson, whose opinion was essentially the majority’s, that was because Truman had no statutory basis for the seizure, not even an implicit one. That isn’t the case here.)

[Lysander]

Um...Is the law written so that the government can nationalize BP but cannot, for example, nationalize Apple Computers? Or is the president and "the law" more or less the same thing?

[Patrick Lang]

graywolf

Well said as a truly rapacious capitalist. I learned the hard way when I went from government to business that there is no place for sentiment in business.

Darwin eh? "Nature red in fang and claw."

You well know what a huge chance you are taking with BP stock. pl