Just What the Oil Industry Needs: More Trade Secrecy
posted by Frank Pasquale
I have tried to give the Obama Administration the benefit of the doubt during the Gulf/BP oil disaster. There was a “grand ole party” at Interior for at least eight years. Many Republicans in Congress would have tried to block nominees for Interior who were committed to a major overhaul of the department’s environmental priorities. But the more I read about the controversy, the harder it gets to excuse current players for their actions. Consider just one issue: the use of dispersants in response to the spill.
As Tom Dickinson’s excellent Rolling Stone article describes the issue,
On May 14th, two days after the first video of the gusher was released, the government allowed BP to apply a toxic dispersant that is banned in England at the source of the leak – an unprecedented practice in the deep ocean. “The effort should be in recovering the oil, not making it more difficult to recover by dispersing it,” says Sylvia Earle, a famed oceanographer and former NOAA chief scientist who helped the agency confront the world’s worst-ever oil spill in the Persian Gulf after the first Iraq War. The chemical assault appeared geared, she says, “to improving the appearance of the problem rather than solving the problem.”
Now we are learning that the some of the dispersants had “no toxicity studies” done to support their use, and we cannot even find out what is in them:
[T]he dispersant products, branded Corexit 9527A and Corexit 9500A, were made exclusively by a former Exxon subsidiary now owned by a company called Nalco. Exxon researchers had already acknowledged that they were significantly toxic for aquatic life. But just how toxic was mysterious — particularly for humans. The publicly available data sheets for both products revealed that they have the “potential to bioconcentrate,” but added this stunner: “No toxicity studies have been conducted on this product.”
Information about their precise composition was also vague, clouded by a veil of secrecy based on “proprietary” concerns. I found the information scarcity outrageous. A private company fouls a vast public resource and then dumps hundreds of thousands of gallons of a toxic chemical potion into it. Doesn’t the public have the right to know precisely what’s in that potion?
Even more depressing, the issue of oil company trade secrecy is not a new one. Residents in the vicinity of hydrofracking methods have been worried about their effect on water supplies for some time. Congress has launched an investigation into gas drilling practices. As Abrahm Lustgarten’s pathbreaking article for ProPublica noted, “it is difficult to pinpoint the exact cause of each contamination, or measure its spread across the environment accurately, because the precise nature and concentrations of the chemicals used by industry are considered trade secrets.” According to Lustgarten, “Not even the EPA knows exactly what’s in the drilling fluids. And that, EPA scientists say, makes it impossible to vouch for the safety of the drilling process or precisely track its effects.”
Respect for “property rights” via trade secrecy has put many lives and our environment at risk, as St. John’s law professor Mary Lyndon has been documenting for years. And yet the Obama administration appears unwilling to “go to the mat” to test the strength of this deeply troubling assertion of corporate prerogatives.
Unfortunately, the Obama administration’s attitude here mirrors its eagerness to keep much of Wall Street’s dirty laundry out of public view. Many smart people have been comparing the lessons of the Gulf Oil Spill to those of the financial crisis. For example, Richard Thaler argues that:
As the oil spill in the Gulf of Mexico follows on the heels of the financial crisis, we can discern a toxic recipe for catastrophe. The ingredients include risks that are erroneously thought to be vanishingly small, complex technology that isn’t fully grasped by either top management or regulators, and tricky relationships among companies that are not sure how much they can count on their partners.
But what happens when that lack of understanding of “complex technology” is by design, rather than by accident? What happens when regulators are so indifferent to public safety that they can’t be bothered to demand some disclosure from an “egregious and willful” violator of public standards? We then have to worry that the lesson to be drawn from the Wall St. crisis is not Thaler’s, but Robert Kuttner’s, who calls Obama’s presidency “in peril:”
[Robert] Kuttner soberly — and often chillingly — shows how Wall Street wields [its] power, sometimes brazenly, sometimes subtly. He names names . . . — like Gene Sperling, the Clinton administration’s last National Economic Council chief. . . .
Wall Street realized that Sperling would likely have a prime role in any Democratic administration elected in 2008 and moved to bring him into the high-finance fold. Goldman Sachs “helpfully created a position for Sperling as adviser to its foundation” and paid him $887,727 in 2008.
That sum would be “chump change for Goldman, but a small fortune for a policy wonk,” notes Kuttner . . . “Now Sperling is a senior economic official in the Obama administration. If you were he, would you cross Goldman?”
Books like 13 Bankers put relationships like this at the very center of financial reform efforts. The choices for the future of oil industry regulation are similarly stark. Exactly what types of revolving doors exist between Interior and the industry? What are the potential rewards for lax regulators? And if the bureaucracy is hopelessly captured, what other types of creative solutions can be developed?
Image Credit: Deepwater Horizon Response.
June 15, 2010 at 6:06 pm
Posted in: Current Events, Economic Analysis of Law, Environmental Law, Politics, Uncategorized
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Responses (3)
A.J. Sutter - June 15, 2010 at 10:03 pm
Unfortunately, given that the US is the globe’s most fundamentalist country about the twin ideologies of “innovation” and property rights, hopes for reform would seem to be no brighter than the billowing discharge from BP’s fallen well. What has been the role of the legal academy in promoting those ideologies?
Frank Pasquale - June 15, 2010 at 11:28 pm
A.J., I agree with you: bad ideas have a great deal of responsibility here. I’ve recently done an article called “Beyond Innovation and Competition,” which tries to show how both of these ideals have been exported to areas where their utility is severely limited. I also hope that we see a revitalization of the precautionary principle; this article suggests problems with recent critiques of it:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=822186
I also think the establishment L&E academy’s efforts to drain robust ecological values from economic analysis have had the most negative effects here. We need a “Manhattan Project” for clean energy and conservation; that *type* of innovation should be paramount.
Finally, I’ll send you a copy of Loic Wacquant’s article on the “Self-inflicted Irrelevance of American Academics” if you’re interested!
CanadaDoug - June 29, 2010 at 7:16 pm
Well done. From the beginning I felt that Corexit, not the oil was the real problem. Now you all should get the hell out of the Gulf area. Oh yeah, why is the Nalco production plant still producing its death agent?
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