Two weeks ago, columnist and public policy scholar Robert Reich wrote:

“It’s time for the federal government to put BP under temporary receivership, which gives the government authority to take over BP’s operations in the Gulf of Mexico until the gusher is stopped. This is the only way the public can know what’s going on, be confident enough resources are being put to stopping the gusher, ensure BP’s strategy is correct, know the government has enough clout to force BP to use a different one if necessary, and be sure the President is ultimately in charge.”

Since that time, the scope and scale of the Gulf oil leak, and its environmental, economic and political consequences, have steadily grown.

Stopping the spill, and beginning recovery, is beyond the capacity of a private corporation. So why didn’t President Obama in his June 15 Oval Office speech call for placing British Petroleum – at least its American subsidiary – in receivership until all claims are processed? Why did he not order that the government clearly and unambiguously assume control and responsibility for the crisis? Especially since taxpayers will be footing a huge portion of the many “bills” that will come due – bills whose scale we can barely glimpse.

As a private corporation, BP’s liability will certainly be capped at some limit less than the real cost, and some limit less than that beyond which the company would just go out of business. That’s the whole purpose of limited liability law that created the corporation as a legal entity. Society permits, even encourages, ventures and permits limiting liability. If liability is not limited, investors simply do not invest. In addition, only the assets of the corporation, in this case its American entity, can be assessed. This formula, designed in the 19th century, works well as long as the overall innovation and efficiency benefits are greater than the social costs of failed endeavors. The BP spill shows that, for deepwater drilling, the formula is in shreds.

Receivership would give the president full disposal of BP operations and U.S. assets to fight the crisis and pay the victims. But receivership is probably not enough.

BP employs 26,000 Americans, and its workers and engineers, including contractors, are a key resource for mastering and ultimately exploiting the great deepwater oil and gas reserves. The declining proven reserves of fossil fuel in shallower areas of the globe makes deepwater drilling necessary for the immediate future, at least, and probably for quite a few years. But clearly, the risks associated with the very complex technologies required to exploit these resources, or at least with the “human interface” to these technologies, are too high to be entrusted to giant private corporations competing with each other to see who gets the oil out of the deep faster. Anyone familiar with the work pressures on the teams working the deepwater rigs knows that ideal safety procedures will inevitably be sacrificed to beating the competitor.

A government takeover of this technology and process will, it’s true, slow down the innovation curve and make it take a little longer to get to the deepwater oil. But until the techniques and safety requirements of this technology are more perfected, we have to go slower, slower on oil. If we try and force giant private multinational corporations to do what’s needed on their own, they will fight it every inch of the way, and conspire (in exchange for more regulation) to drive up prices to protect their bottom lines.

Prices are likely to rise no matter what or who runs deepwater drilling going forward. But a public takeover – now – seems the only sane, and the most economical, way to go.



John Case
John Case

John Case is a former electronics worker and union organizer with the United Electrical, Radio and Machine Workers (UE), also formerly a software developer, now host of the WSHC "Winners and Losers" radio program in Shepherdstown, W.Va.