BP Hearings Aside, Congress Has Treated Big Oil Very Well

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Daniel Hurst | Photographer's Choice | Getty Images

As oil company executives testified to Congress last week about energy policy in the wake of BP’songoing disaster in the Gulf of Mexico, a casual observer may have thought we were transported to an alternate universe.

In one session, Rep. Joe Barton (R-Texas) apologized to BP for what he called a White House “shakedown” (because President Obama demanded a $20-billion escrow account from the company to ensure that damage claims will be paid). Mr. Barton didn’t just get his politics wrong, he got the petroleum-powered math all fouled up too.

As first suggested in this blog two weeks ago and by many others since, BP may face bankruptcy over this debacle when it goes to court with victims all the way from the Gulf to New England for a growing list of damages.

The President’s escrow account is a prudent measure to ensure that at least some victims are compensated. "Shakedown," however, could apply to what the oil industry has done to the American taxpayer for decades.

In a recent 10-year period, for example, oil companies lavished Congress with nearly $200 million in campaign contributions, and reaped 100 times that that in return from the US Treasury in return, according to the Center for Responsive Politics

Perhaps Rep. Barton was himself a “victim”, shaken down to defend the industry in exchange for the reported million dollars in contributions to his own political campaigns.

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What else did Big Oil get from this kind of political shakedown? Direct tax breaks like the “depletion allowance” (oil companies can write off diminishing oil reserves, which they obviously did nothing to create in the first place); defending oil around the globe (the Iraq war alone now exceeds $1 trillion and thousand of lives); and health care costs related to inhaling toxins from petroleum and combusted oil that are astonishingly similar to smoking-related illnesses and deaths, to name just a few.

Many have called for ending these absurd subsidies at a time when we need to diversify our mix of energy sources and specifically reduce oil consumption in the face of global competition for a diminishing natural resource and the growing concerns over climate change. In fact, it was that topic which provided the other Alice-in-Wonderland moment in Congress last week.

Conoco-Phillips CEO Jim Mulva called on Congress to impose a price on carbon. While other oil execs defended their taxpayer-subsidized wealth and boasted that they would never have made the mistakes that led to the Deepwater Horizon blowout, Mulva spent the bulk of his testimony calling on the federal government to “establish a clear and transparent price for carbon.” Essentially, he was asking to be taxed or to have carbon fees imposed through a cap-and-trade system, which are the two primary ways of accomplishing his request, sort of a reverse shakedown.

The Carbon Challenge - A CNBC Special Report - See Complete Coverage
The Carbon Challenge - A CNBC Special Report - See Complete Coverage

Nor is this anything new for Mr. Mulva. In 2008, he and I were part of a team of energy advisors who debated these issues for then-Senator Obama and he strongly advocated then for stable markets that featured a predictable price on carbon. Sadly, Mulva is alone in the oil industry, as his brethren continue to deny the problem and delay solutions.

Although the House has passed legislation to do what Mr. Mulva suggests on carbon, Senate Majority Leader Harry Reid (D-Nev.) seems intent on scuttling a cap-and-trade bill for now, locked in a tight race for reelection and unlikely to take up controversial issues before the November elections.

So the oil industry continues to shake down the US taxpayer for subsidies; make at least one member of Congress feel sorry enough for them to apologize as their product gushes into the Gulf and wash over the nightly news; and manage to escape any cost for its contribution to altering the global climate.

If we’re not living in some alternate universe and this really is the U.S. in the 21st century, it may be time to restart that plan to colonize Mars and hire a moving rocket before it’s too late for the economy, the environment and the treasuries of planet Earth.