White House proposal protects BP's Gulf profits, discourages harsh sanctions

In what amounts to a confounding conflict of interest, the U.S. government is considering a plan that would allow BP to use profits from its Gulf of Mexico drilling operations to ensure the solvency of the $20 billion escrow fund set up to compensate victims of the Deepwater Horizon disaster.

Why is this a bad idea? Because, as Tyson Slocum, director of Public Citizen’s Energy Program points out, it gives the Obama  administration less incentive to prosecute BP for the recklessness and negligence that lead to the disaster and could make regulators less likely to deny BP additional drilling permits. Slocum says:

“The proposed arrangement is wildly inappropriate, as it will make the government and BP virtual partners in Gulf oil production . . . It will give the government a financial incentive to become an even bigger booster of offshore oil drilling in the Gulf – which was the fatal flaw of the Minerals Management Service at the time of the BP disaster.”

Slocum sent a letter to the administration today saying it should change the way the disaster fund is structured to ensure the government can remain unbiased and prioritize the public’s interest – not BP’s interests.

According to Monica Langley in The Wall Street Journal, the government would in essence hold BP’s Gulf oil production as collateral. But Langley says this setup could run into resistance in Congress:

Such a deal could provoke a backlash on Capitol Hill, where some lawmakers are moving to bar BP from operating in the Gulf.