Oil, And the Precautionary Principle

Applying the precautionary principle is a useful means to establish the wisdom of undertaking an activity or to refrain from engaging in an activity when there may not be sufficient evidence as to whether or not the activity will be harmful to people, to the environment, or both. In the absence of evidence as to the potential harmful effects of the activity, it is considered the responsibility of those who engage in the activity to prove it will not be harmful. One might conclude that BP, drilling and pumping oil from the sea bed some 5000 feet below the surface, while relying on blow-out protectors that were unproven at the depth at which they would have had to operate, did so without due regard for potential harm to the public or the environment. If such is the case, well... Testing the blow-out preventers at a depth of 5000 feet is an undertaking that might be compared to space exploration. Once you decide to operate in the unpredictable environment of space the cost of doing so is simply indeterminable, unknown and could be more than one has available or that can be spent profitably.

 There are ways to take guided steps into the unknown, but we will discuss that in relation to a different subject. John Marshall stated that 'the power to tax is the power to destroy'. Historically, the oil companies have sought to establish a way to avoid paying taxes by entering into agreements with governments with rather large and powerful armies to the effect that the oil companies would agree to find oil no matter where it was or how much it would cost to get it. The 'exploration tax credit allowance' was the oil companies answer to how oil exploration would be financed.

 Simply put, the agreement between the oil companies and governments is that the oil companies will find oil with their own money but governments should not tax them, but tax the consumers of oil products instead. Because, the oil companies, argue they need all the money they receive to keep their agreement to secure oil at whatever the costs. BP drilling and pumping oil from the depths of the Gulf of Mexico convinced various governmental regulators that they had installed sufficient and workable, although relatively untested, disaster preventers on their deep sea wells. In fact and in law, it defies rational discernment as to how BP could have tested these devices properly. How does one test these devices under actual blow-out conditions e.g., cause a disaster and then learn how to contain it?

 Creating a model of blow-out conditions at the pressures and temperatures that exist at the sea bottom well-head, considering the highly variable nature of the mixture of gas, oil and ice that forms at 5000 feet below the surface of the sea is a daunting task. Under such conditions, as with climate change, the best computer models cannot distinguish between a long term trend suggesting that global warming is factual, from an abrupt change in climate suggesting simple variability. For example, there is no model of the effects of water vapour, a very big green house gas, on climate over time.

 On the one hand, the executives of BP, had an unknown cost, that is, the cost of preventing a disaster like that in the Gulf of Mexico. And, on the other hand, known costs, such as the amount of money necessary to influence governments, legislatures and courts to limit their liabilities in case of a disaster. The executives of BP applied the precautionary principle and used the preponderance of their money on the later, and not the former. This approach to liability limitation is a matter of policy, and is a result of a careful weighing of projections of known versus unknown costs. These are the kinds of decisions that the top executives of stock held companies are paid to make, that is, to do whatever is necessary to minimise liability costs and to maximise the ability to continue paying dividends to stockholders.

 Toyota, at the first inkling of a problem could have recalled millions of its cars to fix them. They made the decision, however, to spend what was necessary to pay claims, if and when, it could be proved in a court of law 'beyond a shadow of a doubt' that they were in fact responsible for the deaths or injuries that had occurred. This approach cost them less for some few years than the recall would have cost if implemented at the first inkling of a problem.

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