Disclaimer:  I am a chemical engineer; when I was first being trained as an undergraduate, I was among the very, very few that had no desire to enter the petrochemical industry (even academia was slanted towards their patrons, by the way).

Oh, me, oh, my.  Big Oil is fretting that there is an embargo on drilling.  I agree that the embargo in and of itself is not the proper response- unless the embargo is related to an industry/government series of meetings to develop standards that would preclude environmental damage (read my previous essays on risk and benefits).  You see,  as savvy as they are,  Big Oil’s ignorance (arrogance?) knows no bounds.  (I won’t start with BP, because that’s way too easy.)

We heard testimony in Congress the other day that almost every one of these companies (Shell, Exxon , Chevron, and ConocoPhillips) would never have operated in the same fashion as BP.  But, they all copied the same primer (it seems) on how to clean up an oil spill- including the same dead expert in their manuals. Hmm-  they want us to believe they would not have done the same thing as did BP.

Oh, and while these folks use redundancy in their North Sea operations (among others), in America they don’t!. Why, because the MMS (part of the US Department of Interior), using rules developed under the ‘open’, ‘non-biased’ Cheney-led (he of Halliburton fame, one should add) era, does not require redundancy or even remote capabilities to actuate a shut-off,  in the event of catastrophe (like gas leaks that lead to fire and explosions- oh, wait, we are not talking about BP, now). But, Big Oil asserts it would provide different actions than would BP.

This all reminds me of the ads Big Oil ran ran the last two years.  The ads had a big dollar bill,  showing all their (purported) expenses.  Amazingly, the dollar bill was used up before there was ONE CENT of profit.  So, from where did Big Oil derive their profits?  From an amazing quilt of chicanery that our government tolerates.  We allow them to set up transportation companies, drilling companies, marketing companies- each selling to one another, using ‘transfer’ pricing.  So, there may be profits from the transfer, but you won’t find them unless you look at the corporate parent, which keeps those profits for itself.

And, let’s not forget the credits they get for paying taxes overseas (claiming they would be paying taxes twice).  But, that is not quite the way it works. Most of us consider taxes to be paid on profits after operations.  We give Big Oil (among other entities) credit for taxes paid (to places like Saudi Arabia and Kuwait); those taxes are added in to the price we pay for the oil, so it’s not really after profits taxation.  (Note:  Exxon paid no taxes on 2009 profits exceeding $ 45 billion- not withstanding its advertising.  While not part of big oil, but GE had a similar deal- it paid NO taxes on profits of $ 10 billion+.)

In other words, we need better regulation (I won’t be discussing the tax issue any longer here)- but regulation based upon best principles- worldwide.  That does mean we need corporate input- but not corporate veto.  I (and everyone else) have heard all the moaning and groaning when environmental regulations were imposed on Big Oil- how this would terminate their activities, stifle profits, and the like. That was some 30 years ago.  Let’s see, BP made about $ 15 billion last year. Exxon generated, as I said above, $ 45 billion. Yes, indeed, environmental regulation stifled their profits.

I truly hope that BP, in concert with ALL of the oil companies, our best scientists, and our government get together VERY soon. (Today would be nice.) Solve this dilemma in the Gulf.  Design processes that would preclude another occurrence, using the very best practices. And, more importantly, add in a fee on each barrel of oil pumped out of the seas from now on. Place those moneys (fees, not taxes, so they would be deductible to the payors) into a fund that will provide a $ 100,000 to the five or ten best research projects that academia develops to advance the state of our art- from drilling to controls, and another series for alternative energy.  (Right now, our research process funds academia based upon approved proposals.  That process should continue; this will follow the approach that was developed by Eli Lilly (Innocentive) to reward researchers who did not want all the controls that are associated with funded research, but still leads to innovation.)

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