Earlier this week I wrote a blog post defending Jennifer Aniston’s stalker. I’ve decided to up the ante and write one defending BP. Think of it as an intellectual exercise. Think of it as me putting my J.D. to work by playing Devil’s Advocate.
Back in 1990, the government told BP that if it spilled oil, it wouldn’t have to pay more than $75 million to clean up the mess…no matter how big the mess was. The bill that contained this $75 million cap (as well as an eight cents per barrel tax) passed through the Senate 99-0, through the House 375-5.
Well guess what.
BP spilled and now the government is trying to go back on its promise and make BP pay more than $75 million.
In contract law, we ask whether a party “relied on a promise to its detriment.” In this case, BP probably did. BP probably just drilled so overaggressively because of the $75 million cap…because it knew it wouldn’t have to pay that much if it messed up. In other words, the government was BP’s enabler.
$75 million? Not even adjusted for inflation? For a major oil company, that’s nothing!
It’s important for the government to keep its word. If the government tells you it’ll give you Social Security checks when you retire, it’s important that the government actually give them to you when you retire. (Especially if you quit your job when you hit retirement age, relying on the government’s promise to give you SS benefits.) If the government tells your company it’ll get a tax break if, say, it relocates to Detroit, it’s important for the government to make good on that promise, too.
See, government incentives have the power to do tremendous good in so many sectors. But incentive programs only work when people take the government up on them. And that only happens when people trust the government to keep its word.
So maybe the Federal government should be paying for this one…
P.S., On a personal note, I believe BP should opt to pay more than $75 million. A lot more. It’s the right thing to do, and it’s actually good business in a lot of ways.
P.P.S., I also believe the government needs to stop passing such crappy bills. Not even adjusted for inflation!