Redesign the Paradigm

Oil companies have amassed massive profits over the past decade. BP is the largest oil and gas producer in the United States with over 22,000 oil and gas wells many on federal land) across the United States. It has enjoyed considerable profits along with the other major oil companies over the past five years. BP profits for the first quarter of 2010 alone were $5.59 billion dollars. Since 2005 profits have totaled approximately $105 Billion according to their own annual reports.

In the past three years BP has managed to receive 97% percent of all flagrant violations issued by the Occupational Safety and Health Administration (OSHA). BP accumulated 862 citations (760 classified as egregiously willful) for violations at two of its five U.S. refineries. It is also still under scrutiny by the federal worker – safety monitor for the 2005 explosion at the Texas City refinery that killed 15 workers after failing to correct problems that were pointed out by OSHA inspections.  Last year BP was fined $87 million for violations at the same Texas City refinery and another $3 million for violations at the Toledo Ohio refinery. BP is in the process of contesting the penalties.

It appears clear that BP has displayed a blatant disregard for regulations involving safety, maintenance, and operational procedures and this disregard extended to the rig Deepwater Horizon. Senior managers from BP were overheard “taking shortcuts” that involved substituting salt water for heavy drilling fluid in the well that blew out and resulted in the oil spill currently ravaging the Gulf of Mexico and 11 deaths. BP’s attitude of non-compliance towards regulation seems motivated by profit maximization and the company has not appeared overly concerned with consequences.

This may be due to the “cozy relationship” BP has with the Mineral Management Service who is responsible for safety and environmental regulation. The Obama administration has vowed that this relationship will cease. Another possible reason for non-compliance could be the tens of millions of dollars on lobbying ($16 million spent last year alone) over the past 5 years, much of which was concentrated against regulation. It also donated more than $500,000 in campaign contributions for federal elections. Another factor could be a result of oil industry lobbying influence from the past which resulted in a government reserve fund called the Oil Spill Liability Trust Fund. There is approximately $2 billion in this fund to cover a disaster like the one occurring in the Gulf. The reserve fund also ensures that operators of offshore rigs will be held liable for only $75 million in damages claimed by individuals, companies, States, or the federal government. They can still be held liable for clean up costs.

Regardless of the reasons for non-regulatory compliance, it appears BP will once again rely on lobbying to influence key legislators to reduce long term penalties and to fight violations and lawsuits in court much like Exxon did with the Exxon Valdez spill. They are confident this practice will result in the greatest cost savings and retention of future profits. Once again the U.S. taxpayer will be left picking up the tab, this time for unspecified clean up costs, loss of States revenue from tourism, and the economic damage done to numerous industries that rely on the Gulf. Not to mention the potentially irreversible environmental damage done to coastlines that may even include Atlantic seaboard states. This cannot be allowed to happen!

BP has demonstrated a willingness to take the measures necessary to cap the flow and take the lead in the clean up. Twenty-two thousand people and a small armada of ships are currently working on the spill. But in reality, they have not brought near enough resources to bear quickly enough to stem the flow or to clean up the oil. A small fleet of supertankers used successfully in the Persian Gulf spill, each capable of sucking up to one million gallons of oil / water a day has not been implemented to date. Additional fast moving Coast guard, military, and civilian vessels could have been utilized to skim and remove surface oil. Assistance from Exxon, Shell, Chevron, ConocoPhillips and other industry experts were not sought out quickly enough nor were suggestions acted upon. Many including the U.S. government incorrectly assumed that BP was the expert in such matters and had the best chance of correcting the damaged well.

BP is still cutting corners even in the face of this disaster choosing to use almost 800,000 gallons of the cheaper less effective and much toxic chemical dispersant Corexit to break the oil up even after the EPA asked it to cease. Corexit is produced by Nalco and BP enjoys a tight relationship with Nalco sharing board of director members .The Obama administration has also been accused of being at fault and not pressuring BP enough to ensure appropriate action was implemented rapidly enough.

Hopefully the Top Kill or Junk shot procedures will be effective in the next few days and a relief well will be drilled into the original borehole and drilling mud pumped in to permanently stop the oil flow. But even if these measures are implemented quickly there is no guarantee of complete success. Note – Top Kill was not successful.  All these practice were used on the Ixtox 1 back in 1979 in water 160 ft deep (Deepwater Horizon is at 5000 ft),  they were all unsuccessfull. That well was not sealed for 9 months until the releif wells were completed.

BP needs to be incentivized to ensure that it will take all actions necessary to ensure that not only the well is sealed, but that clean up is rapid and thorough, the coastlines have been restored to the fullest extent possible, and that the livelihoods of those affected by the Gulf spill are re-established or they are compensated accordingly. BP must not be allowed to lobby and litigate there way out of accountability.

The Obama administration should demand that BP have the well fully sealed by relief wells within 90 days, the bulk of surface oil be removed from the Gulf within 180 days and if necessary from Florida and the East Coast, and that the oil be cleaned from the affected coast lines and marshlands within 180 days. Note – these timelines are arbitrary and should be determined by the EPA, independent environmental, and industry experts. Failure to meet these conditions will result in:

• Suspension of all U.S. contracts and barring of future contracts – this will cease BP’s access drilling operation on all federal lands both onshore and offshore.
• Seizure of BP’s holdings on U.S. federal lands. Negotiate settlement requiring all profits derived from oil and gas obtained on U.S. federal lands be allocated clean up measures and restitution to affected parties. If BP attempts to use litigation to delay negotiations, turn over operations to U.S. base competitors and split the profits with federal/state governments until adequate cleanup measures and restitutions are made.
• Federal government will spearhead lawsuits and provide litigation support for individuals and companies affected by the Gulf disaster . Litigation will be directed at BP both domestically and abroad where applicable.
• Put a moratorium on BP’s lobby access and campaign contributions that would result in favorable legislation regarding the Gulf oil spill. This will include barring BP from hiring any third party (ie. the Chamber of Commerce) to lobby for them for the next five years or until the matter is rfully esolved in the U.S.

An investigation needs to be conducted to determine if BP was criminally liable, and to what extent TransUnion or Halliburton were at fault. If this appears harsh, it is meant to be. The long term effects of this disaster are immeasurable. It will affect people’s lives for years and the U.S. taxpayer should not be left paying the long term expenses.

My intention is not to put BP out of business, simply to stimulate the company to respond to its full potential, and not allow it to remain focused on maximizing its profits. It has lost that option concerning this situation. BPs profits over the past year should be more than suitable to cover all the expenses associated with this disaster. This will also send a strong message to the other oil and gas companies that strict adherence to the safety and maintenance protocols is serious, mandatory and can prove extremely costly.

This incident is just another in a long string of reasons as to why it is time to shift the focus away from fossil fuels and towards renewable energy sources such as cellulosic ethanol, biodiesel derived from jatropha, halophytes, and bioalgae, wind energy, solar thermal and geothermal. 

http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9021605&contentId=7040949

http://www.osha.gov/dep/bp/bp.html

http://www.grist.org/article/2010-05-17-bp-has-numerous-safety-violations-at-refineries-study-finds/

http://www.opensecrets.org/lobby/clientsum.php?year=2009&lname=BP&id=

http://www.propublica.org/feature/epa-officials-weighing-sanctions-against-bps-us-operations

http://www.politifact.com/truth-o-meter/statements/2010/may/02/lamar-mckay/bp-letter-mms-urges-reduced-regulation/

http://en.wikipedia.org/wiki/Deepwater_Horizon_oil_spill

Is lobbying a beneficial component of government decision making, or an avenue for corporations and special interest groups to guarantee that legislation will favor their goals, often at the expense of the public at large?

The purpose of lobbying is to influence legislators and government officials who are responsible for regulation on behalf of a special interest group. Lobbying is protected by the right to petition found in the first amendment of the constitution. The right to petition guarantees citizens the right to request or appeal to our government for or against policies that will affect them or they may have strong opinions or beliefs about. It also guarantees that these actions will be free from punishment or reprisal. But what percentage of actual lobbying goes towards defending a citizen or a groups right to petition versus influencing legislators in order to acquire government contracts, remove regulation, lower corporate taxes, limit competition, etc. in order to create an environment conducive to greater profits?

A lobbyist is defined as anyone who “directly or indirectly, solicits, collects, or receives money or any other thing of value to be used principally . . . to influence, directly or indirectly, the passage or defeat of any legislation by the Congress of the United States”. The intended rationale of lobbyists today involves not simply influencing legislators but explaining the goals of the special interest and assisting to overcome potential obstacles legislators may face meeting those goals. Lobbying occurs at the city, state and federal level.

Organized lobbying in the U.S. is almost as old as the country is. William Hull in 1792 represented Virginia veterans in attempts to acquire additional compensation for their services in the War of Independence. Early lobbying practices were free from any form of regulation and utilized far less legitimate techniques than found today. Early lobbyists quickly attained a reputation by both press and public as disreputable, corrupt and a subversive influence on democracy. All attempts to regulate lobbying over the past 200 years have been met with only limited success. Obviously, lobbyists lobby best on their own behalf.

The total number of registered lobbyists at the federal level for 2009 was 13,700 and at the state and local levels 38,800 representing some 53,400 clients. There are of course more lobbyists who have chosen not to register or have deregistered over the past few years but are still engaged in lobbying activities. This is easily done by adopting a title other than lobbyist such as senior advisor then claiming that no more than 20 percent of a persons time is spent lobbying, this is relatively simple since federal laws do not require that lobbyists document the activities they claim they are doing. Actual numbers of fulltime lobbyists are probably closer to 70,000 and this doesn’t include large public relations and marketing firms engaged in numerous activities that clearly fall under the definition of lobbying.

Lobbyists and their clients spent more than $3.47 billion last year up from $2.85 billion in 2007 attempting to influence legislators. How much of that amount went solely towards lobbying dedicated to increasing corporate profits? The numbers break down for the three major sectors and sub sectors as follows:

Miscellaneous Business Sector

Total Miscellaneous Business expenditures from 1998 to 2010 was $4,050,396,479

Miscellaneous business expenditures increased $145,000,000 or 35 percent from 2007 to 2009

        Sub Sectors

• Business Associations sector – Massive 173% increase in lobbying from the Chamber of Commerce which claims to represent approximately 3 million businesses and organizations but has been criticized for being primarily a republican lobbying machine focused on removing climate change legislation and healthcare reform and disproportionately lobbying for oil companies, pharmaceutical giants, and automakers.
• Manufacturing & Distributing sector – 25% increase in the past three years as fortune 500 companies ramped up lobbying. The top spenders in 2009 were:
  • GE increased expenditures to almost $24 million for a variety of lobbying to get government contracts and subsidies one of the largest was for wind turbines and clean coal research.
  • Honeywell spent $7 million more for aero space defense contracts, aircraft safety & technologies, and energy conservation / biofuels).  
  • Procter & Gamble paid $4.5 million to lobby for positive tax and foreign trade legislation in addition to having input on food and drug safety for its products.
  • Food & Beverage sector was led by the American Beverage Assn who is the major lobbying representative for the beverage industry ($18,850,000) and companies like Coca-Cola Co. ($9,390,000) and PepsiCo Inc. ($9,159,500), all totaled spent more than $40,000,000, a 400% growth over prior year, to successfully defeat the National Soda Tax of 1 penny per ounce designed to pay for obesity related health care costs.

Health Sector

Total Health sector expenditures from 1998 to 2010 was $3,980,184,031

Health expenditures increased $97,579,000 or 22% from 2007 to 2009

Sub Sectors

• Pharmaceuticals/Health Production sector – 18% increase since 2007 as the determined pharmaceutical and health services industry increased lobbying to fight against the democrat lead health care bill. The big spenders in 2009 were:
  • Pharmaceutical Research & Mfrs of America (PhRMA), is an exceptionally powerful and influential lobbying organization that represents 48 of the largest pharmaceutical companies. In 2009 alone it spent $26 million defending pharmaceutical intellectual property rights, fighting against price controls, creating favorable regulation, and a broad attack against healthcare reform. PhRMA also uses numerous other organizations to advocate on its behalf. 
  • Pharmaceutical / Health Product companies – Lobbying amongst all pharmaceutical companies was concentrated on overturning healthcare reform. Other lobbying interests included those lobbied for by PhRMA as well as specific industry related tax breaks. Largest individual lobbying expenditures included:
    • C Pfizer Inc spent $24,619,268 in 2009 as compared to $12,180,000 in 2008
    • Amgen Inc $12,440,000 in 2009 as compared to $10,800,000 in 2008
    • Eli Lilly  $11,215,000 spent less than 2008 amount of $12,485,000
    • The next 10 largest pharmaceutical companies all spent between $5,000,000 and $9,000,000.        
  • Health Services/HMOs sector – increased spending almost $23,000,000 a 45% increase over 2008. This sector represents large health care insurance companies like United Health Group ($4,770,000), Blue Cross / Blue Shield ($4,700,000), and Humana ($3,180,000). It also represents companies that provide health care related services such as DaVita Inc. ($2,870,000) and Medco Health Solutions ($3,977,000). This sectors principle lobbying interests involved defeating healthcare reform and ensuring Medicare and Medicaid payments / overpayments continue unimpeded.

Finance, Insurance, and Real Estate Sector

Total Finance, Insurance, & Real Estate expenditures from 1998 to 2010 was $4,050,396,479

Finance, Insurance expenditures increased $45,639,000 or 18% from 2007 to 2009

Sub Sectors

• Insurance sector – 18% increase since 2007. The principle increase in the insurance industry was from healthcare related insurance companies or healthcare divisions within insurance companies to once again overturn the new health care bill. The big spenders in 2009 were:
  • Blue Cross/Blue Shield spent $14,805,439 in 2009, as compared to $11,770,165 in 2008 and included measures to use the issue of state’s rights to render the proposed health care reform and its regulation of insurance unconstitutional
  • America’s Health Insurance Plans spent $8,850,000 in 2009, as compared to $7,540,000 in 2008 and included efforts to create the Campaign for an American Solution. This was an attempt to generate grassroots support for a suitable healthcare reform based on existing practices that would incorporate coverage, quality, affordability, choice, and core portability.
  • American Council of Life Insurers (ACLI) spent $7,530,583 in 2009, up from $6,375,032 in 2008 representing 300 insurance companies which accounts for over 90% of all U.S. life insurance companies focusing on privacy regulations, tax issues, and pension reform.
  • The next 10 largest insurance companies all spent between $4,000,000 and $7,000,000 and included life insurance, automobile insurers, and health insurance companies. Many insurance companies lobbied for legislative support to enforce and expand the Financial Services Act of 1999 which enables insurance companies to provide financial services.
  • Finance / Visa Credit Companies increased spending 26% since 2007. This sector represents large credit companies like Visa Inc ($6,010,000), American Express ($3,260,000), MasterCard Inc ($3,100,000) all of which spent heavy on legislation to curtail credit card restrictions, overdraft fees, consumer financial protection, and data security issues. It also represents companies like Sallie Mae (SLM)( $480,000) who increased lobbying drastically to fight against legislation designed to cut SLM and other private lenders out of student loan programs, and GMAC LLC ($5,320,000)  which lobbied for new consumer protections, assistance for struggling mortgage holders, foreclosure prevention, and against proposed regulation on the derivatives markets.

Energy and Natuaral Resources Sector

Total Energy & Natural Resources expenditures from 1998 to 2010 was $2,902,630,507

Energy & Natural Resources expenditures increased $156,606,000 or 50% from 2007 to 2009

   Sub Sectors

• Oil & Gas sector – The unprecedented 100% increase since 2007 in lobbying from the major oil & gas companies was due to the growing impression that fossil fuel dominance may be beginning its decline. Lobbying from all companies concentrated on battling the proposed cap and trade policy, debunking climate change, ensuring that the oil & gas industries remain influential over energy policies,  maintaining decades-old tax incentives and subsidies, and in successfully convincing the Obama administration to grant access to offshore and domestic drilling.
  • Exxon Mobil – Spent $27,430,000 which was down from 2008’s $29,000,000 but a substantial increase over $16,940,000 in 2007. Exxon Mobil also funded climate change denial groups to promote their climate views via publications and Web sites which were not reviewed or verified by the scientific community. In addition, strongly lobbied for free market advocacy.
  • Chevron Corp – Spent $20,815,000 up from $12,844,000 in 2008.  Chevron devoted extra attention shaping an effective U.S. energy policy representing oil industry interests. It also lobbied hard to establish political barriers to renewable energy companies and clean energy.
  • ConocoPhillips – Spent $18,069,858 up from $8,459,053 in 2008. Lobbying also focused on the federal government where ConocoPhillips was seeking additional time to pay for millions of dollars worth of fines for pollution related cleanup expenses associated with its refineries and favorable legislation for Alaskan oil drilling.
  • BP – Spent $15,990,000 up from $10,450,000 in 2008. BP has lobbied successfully over the past few years to win insider access and many believe has received lenient treatment on a number of violations. It also spent heavily to rebrand its image more towards an overall energy company embracing clean energy in addition to fossil fuels.
  • The remaining top ten companies spent between $12,000,000 and $2,000,000 and included Koch Industries ($12,300,000) which operates oil gathering systems and pipelines and American Petroleum Institute (API) ($7,320,000) which is the industries main trade association representing over 400 companies.
  • Electrical Utilities sector – 28% increase in expenditures over the past three years. This sector consists of the largest utilities companies across The U.S. such as Southern Co ($13,450,000),  American Electric Power ($7,297,245), and  IPG&E Corp ($6,280,000). All of the power utility companies lobbied to influence congress on new climate change legislation before and after it passed in the house. The new federal energy bill would require a reduction of greenhouse gas emissions, mainly carbon dioxide, that has been credited with climate change, this is significant since up to 80% of portfolio’s are concentrated in fossil fuels. Edison Electric Institute (EEI) ($10,500,000), the countries largest electric power company association led lobbying opposition against one of the new federal energy bill provision’s that would require utility companies to produce at least 15% of electricity from renewable sources.

Summing up these findings and looking at each of the top four sectors it becomes apparent that the vast amount of lobbying dollars spent is to improve the bottom line of a lot of corporations. The issue at heart is not that they are simply trying to influence favorable legislation from the U.S. government it is that the corporations then end up controlling a disproportionate amount of the federal budget, which ultimately means our U.S. taxpayer dollars.  There seems to be an unspoken calculation that if a certain amount is invested on lobbying and campaign contributions by corporations it can be expected they will receive both favorable legislation and a certain amount of money allocated through the federal budget (through government contracts, subsidies, tax breaks, etc). This just further exaggerates the imbalance of favorable legislation and access to federal dollars between those with millions of dollars available for lobbying and those who cannot afford it. As a taxpayer I am concerned how this benefits the US and the long term interests of its citizens.

Analysis of the each sector further demonstrates how  lobbying  favors well funded special interests. The Chamber of Commerce is the largest lobbying spender. It is supposed to represent businesses of all types and sizes. In reality, the vast majority of lobbying expenditures were focused on protecting fossil fuel and pharmaceutical interests and bailing out the automotive industry. Small and medium size companies the backbone of U.S. job growth were disproportionately represented. It could be argued saving the automobile industry would save jobs but lobbying for the fossil fuel and pharmaceutical industries was designed to protect profits.

The manufacturing sector concentrated on lobbying for tax breaks and subsidies and to acquire government contracts whether they were the best candidate or not. In some cases they lobbied to create contracts that may or may not be needed or directly benefitting the taxpayers.

In the health sector, large pharmaceutical interests revolve solely around defeating health care reform and limiting any price control measures that may be implemented. While this may benefit corporate profitability but we are the only country that pays the high prices for pharmaceutical drugs. All the while the taxpayer will be paying more money into Medicare and Medicaid to help pay for the high costs of health care and pharmaceutical drugs. Health service companies and HMOs successfully lobbied to defeat health care reform in order to protect their profits from government sponsored health care insurance or a non-profit healthcare system similar to countries in Europe.

The financial sector lobbied to limit regulation on lucrative financial arrangements and financialization. This is certainly not beneficial to taxpayers since it led to the financial collapse in early 2008. However, tens of millions of dollars has successfully stalled any significant regulation against financial instruments. The insurance companies may very well be an example of not meeting the before mentioned unspoken calculation, they did not spend or influence to the same levels as the pharmaceutical companies did and while they were able to defeat the government sponsored health care insurance system, they were not successful in completely defeating the pre-existing condition exemptions.

Finally, in the energy sector, the oil and gas companies lobbied strongly to discredit climate change, defeat cap and trade and reduce proposed climate change regulation. The fossil fuel industries were protected from legislation that was designed to limit pollutants and CO2 emissions while removing the requirement that 15% of energy use had to come from renewable sources. This has resulted in an energy policy still overwhelmingly influenced by the fossil fuels industries at a time when we need to be weaning the country off of oil and gas and into renewable energy sources.

Almost all of the top 15 sectors (see data below) with the exception of labor, ideological, civil service, non-profits, and education (the bulk of this subsector isn’t for education but for subsidies for universities) were lobbying to create an environment conducive to increase profitability and could be argued that the overwhelming amount of dollars spent supports profitability while not contributing much towards the well being of the country.

While lobbying is in compliance with the right for citizens and special interests to redress government legislation it is being exploited by corporations and those with enough financial backing.  Lobbying as it has evolved unequally provides favorable legislation and other perks at the expense of the citizens/taxpayers as a whole.  In addition, it is ensuring profitability in sectors that cause environmental damage, resulted in unnecessary and over spending, and even financial collapse of the country. This is the time that government spending and perks need to be reigned in to help rebalance the federal and state budgets. Tax dollars need to be allocated towards systems that actually benefit the public good and the long term viability for our country.

The problem that lobbying demonstrates is not that companies are not only lobbying to ensure their profits, they are lobbying to ensure profits in arenas that are hurting the US citizens and taxpayers. Lobbying for practices within industries that cause environmental problems, collapse of our country, lock us into long term fossil fuel use as opposed to clean energy, and intend to maintain the same type of healthcare system that will soon price itself out of the range of affordability are not in the best interests of humanity.

Other items of interest:

Over the last 10 years, 198 members of congress or 43 percent of legislators have left public office to become registered lobbyists. Similar percentages are applicable at the state level, fewer at local levels.

Lobbying fees have risen from $10,000 to $15,000 a month a decade ago to $20,000 to $25,000 a month or more now.  Republican lobbyist firms can charge even more.

Lobbying activity has increased despite the economic downturn demonstrating that lobbying is truly recession proof.

http://www.lobbyists.info/

http://www.washingtonpost.com/wp-dyn/content/article/2005/06/21/AR2005062101632.html

http://www.followthemoney.org/database/graphs/lobbyistlink/lobbymap.phtml?p=1&y=2009&l=1

 http://www.opensecrets.org/news/2010/02/federal-lobbying-soars-in-2009.html

 http://www.wilsoncenter.org/index.cfm?event_id=4244&fuseaction=events.event_summary

 http://www.sourcewatch.org/index.php?title=Southern_Company