A troubled political legacy
Posted on | June 30, 2010 | No Comments
One of the oldest sayings in the US Congress is: “There is no such thing as a good regulatory outcome”.
In this season of dire financial and, it seems likely, political reckoning, that fatalistic expression may describe the troubled political legacy of the great oil blowout of 2010.
Major underwriters have made it clear that there will be no insurance coverage if the economic restitution and clean-up limits in the 1990 Oil Pollution Act are raised, for tanker vessels, from their present cap of $75 million, to either unlimited, or at least more than $1 billion. This means that, if a major increase is rejected by the underwriters, tanker visits to the United States could, conceivably, be disrupted.
Regarding drilling rigs, a U. S. minimum financial responsibility/insurance cover requirement of $1 billion is seen as inevitable.
Presumably, the London insurance market will accept this level of exposure.
“Presumably” is a big word. The most troubling legacy of Deepwater Horizon goes to fundamental issues that lie just beneath the surface: can the safety of offshore drilling be regulated in ways that satisfy public expectations? And what about tankers? What happens after the next oil spill, particularly if it involves a tank vessel?
Make no mistake: these are political issues, and they are international in scope; far beyond the limited public interest in Somali piracy or sulphur dioxide emissions, the effect of a major oil spill brings with it massive voter awareness. Washington knows this; so does Brussels. And, later, the IMO.
The political class is therefore looking for a way to immunise itself from blame for the Gulf of Mexico disaster, and the next spill too. And not just in the States.
We, in shipping, have our political class as well. It occupies organisations such as the various chambers, institutes, and bodies whose names begin with the word “inter”.
Recent personnel adjustments in some policy centres –and more to come–reflect a sense that a higher performance level will be needed to meet the oil spill-related challenges that clearly lie ahead. The issue of liability levels in OPA ’90 is but a foretaste: an amuse-bouche, if you will..
This is a game that real politicians can play. When industry spokesmen complain that “politicians don’t understand shipping”, or “shipping doesn’t get the attention it deserves.” Well, when it comes to spills, we’ve got their attention. And they understand what a spill means — to them.
The fallout is apparent in Washington, and believe me, it’s coming soon in Brussels and elsewhere.
An example in the States is in the last two issues of Rolling Stone, the same muckraking magazine that broke the interview with General Stanley McChrystal that ended his military career.
Their reporter Tim Dickinson is in the process of tearing into Interior Secretary Ken Salazar’s management of his department and its subagency, formerly named the Minerals Management Service. The thrust of his invective is that ineffective regulation by the Obama administration could lead to another blowout, when drilling starts in the Arctic.
While the British media have tended to focus on what is sometimes seen to be unfair criticism of BP, the growing outcry targeting the US Government is an important message for tanker operators: the same thing will happen if and when a vessel-related spill, a la Exxon Valdez, next happens close to the U.S.
Shipowners are not particularly politically aware animals; we have also just had an instructive lesson in the political naivete of oil companies.
But oil spills are by their nature highly politicised events. As one observer told the Financial Times last week,
“Washington is basically saying an oil company has endless liability if it spills. Very few companies will want to, or be able to, afford to operate in the Gulf of Mexico under those conditions.”
The implications for shipping in general, and for the insurance industry, are obvious.
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