Many parallels can be drawn between Washington’s response to Lehman Brothers’ collapse two years ago and its reaction to the British Petroleum catastrophe this summer.
Our federal leaders used Lehman’s bankruptcy and the subsequent economic fallout as a springboard for unrelated, dubious financial regulation like much of the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act.
Capitol Hill’s response to the meltdown succeeded in greatly expanding government control of our financial system but did little to address the actual problems which lead to our economic crisis.
As with the financial fallout, many in D.C. have leveraged this year’s catastrophe in the Gulf to push for sweeping, unrelated measures that have already and will continue to hurt the U.S. oil and gas industry and, consequently, our economy.
Next week’s meeting of the President’s National Oil Spill Commission may provide further insight into BP’s failings and the extent to which those missteps set them apart from others in the sector.
Make no mistake, the Deepwater Horizon oil spill caused by BP’s dismissive attitude toward safety did tremendous damage. But our government’s reaction to it can have an even more lasting effect.
The administration’s hasty Gulf moratorium dramatically cut U.S. energy production in the Gulf and directly resulted in an estimated 20,000 lost jobs, $1.2 billion in missed paychecks, and a $5 billion reduction in our national GDP.
This resulting unemployment isn’t isolated to offshore rigs. Attacks on our community’s energy producers also spread to realtors in St. Charles Parish, nurses at Memorial Medical Center, baristas on Canal Street, and thousands of other workers in manufacturing, education, and other industries.
Such drastic action could be justified if widespread problems did exist; if lives and ecosystems were threatened by easily avoidable risk unless massive changes were made in the industry. But that is simply not the case. With the exception of BP, energy companies operating in the Gulf have done an exemplary job of protecting workers, communities and the environment, and continue to do so.
The oil and gas industry supports over nine million American workers – more than 320,000 in Louisiana alone. They efficiently provide us with domestically produced energy while maintaining a first-rate safety record.
Overall, the U.S. energy industry is the safest and cleanest in the world, and is the safety standard all other nations aspire to emulate. There’s a good reason the Chilean government selected American driller Jeff Hart to rescue its 33 trapped miners in the face of seemingly impossible odds.
Yet, the Pelican State and the broader U.S. economy are now needlessly suffering due to a political target painted on one rogue company. Even a causal examination of BP’s safety record shows the vast difference that exists between it and its competitors in the Gulf.
This distinction is akin to difference between the Lehmans and AIGs that were rescued from the brink of financial system Armageddon with government bailouts and the thousands of American banks and homeowners that responsibly chose to sit out the bubble.
In both situations, consumers and the economy would have been best served by timely, targeted, and deliberate regulatory action to separate good and bad business practices, instead of the after-the-fact, sweeping, punitive actions federal officials took against entire industries.
The midterm elections have shown us that voters get it: poor regulatory and economic responses that destroy growth do not go over well with the American public. Moreover, voters also get that their welfare and that of their families are merely collateral damage of manipulation in the larger political power-play.
Officially lifting the moratorium just a week out from the elections, Interior Secretary Salazar effectively demonstrated that discretion over the moratorium would be used to affect election results, but never to rescue jobs and help families in recession.
Still, even lifting the official moratorium was a hollow gesture, as a de facto moratorium on shallow and deep water drilling is held in place in the form of substantial delays in approving permits for work to resume.
Real economic issues are bipartisan. Voters showed displeasure with administration’s policies on Tuesday by re-electing vocal opponents of the policy such as Sen. David Vitter, and providing broad support for Sen. Mary Landrieu in her well covered dispute on the topic with leadership of her own political party.</p>
The 2008 Wall Street meltdown and the 2010 BP spill were the result of careless actions by rogue operators. In both cases, the policy response seems driven more by a desire to punish the entire industry rather than separate the bad actors or projects and subject them to strict remediation.
Proposed new energy taxes suggest that political agendas will continue to take a front seat to economic realities, at the expense of Louisiana’s, and the entire nation’s, economy.
Joseph R. Mason is the Moyse/LBA Chair of Banking at the Ourso School of Business at Louisiana State University, and author of several studies on economic impacts of the administration’s energy policies.