06.09.2010 0

Antitrust Rules, Damage Caps Should be Reconsidered

By Kevin Mooney —

Standing behind the after affects of the Deepwater Horizon oil spill is an incestuous relationship between big business and big government that grew out of regulatory stipulations liberal media outlets have long championed. Although the New York Times has done an effective job of exposing BP’s negligence, it has overlooked the role of public policy.

Some of the reporting has been very beneficial and helpful to readers and the newspaper deserves credit for investigative work that calls attention to internal documentation. Apparently, BP workers and engineers had expressed concern over the well casing and the blowout perimeter for some time, but to no avail, the documents show.

BP officials insist they did not take any undue risks. The Times reports on the documentation as follows:

“On June 22, for example, BP engineers expressed concerns that the metal casing the company wanted to use might collapse under high pressure.

`This would certainly be a worst-case scenario’ Mark E. Hafle, a senior drilling engineer at BP, warned in an internal report. `However, I have seen it happen so know it can occur.’

The company went ahead with the casing, but only after getting special permission from BP colleagues because it violated the company’s safety policies and design standards. The internal reports do not explain why the company allowed for an exception. BP documents released last week to The Times revealed that company officials knew the casing was the riskier of two options.”

Readers can decide for themselves how BP’s leadership handled the warnings from its own employees. However, The Times should also consider asking some hard questions about the cozy relationship between regulators and the companies within their purview. As a consequence of antitrust rules that earn praise throughout the media, companies are constantly looking for ways to curry favor with top bureaucrats. Instead of generating revenue from average customers, corporate leaders are now looking toward government for financial inducements.

This is not healthy politically or economically.

Ultimately, corporate discipline will come from competition, not government regulators.

The NYT should also ask policymakers if it makes sense to maintain the cap on on damages in exchange for increased tax payments. This was instituted after the Exxon Valdez spill. But shouldn’t companies absorb the cost of their failures? Limiting liabilities for shareholders may be appropriate but the same should not hold true for corporations.

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