Now that we’ve been listening to nearly non-stop coverage of the Gulf oil spill for two months and we’re now having to listen to the commercials the coastal towns are running to undo the damage to their tourist industry caused more by the media than the spill, it’s time to start taking a good look at what this is all about and how it came to be.

In 1986, President Reagan signed legislation establishing the Oil Spill Liability Trust Fund (OSLTF). That legislation established a $1 billion fund to assist with oil spills. However, the OSLTF was not funded at that time.

After the Exxon Valdez oil spill in 1989, Congress passed the Oil Pollution Act (OPA) of 1990. Funding of the OSLTF was provided whereby the oil companies were to pay a tax of five cents per barrel for each barrel of oil produced in or imported into the United States until the OSLTF was fully funded. The tax would be suspended during any calender quarters when the fund exceeded the limit and re-instituted any time the fund fell below the $1 billion cap. Section 2704(a)(3) of the OPA established the $75,000,000 cap on compensatory damages (not cleanup costs) for offshore oil spills. This cap applies to compensation paid to fishermen, tourist businesses, etc that had lost a portion of their livelihood due to the spill. The OSLTF could be used to pay excesses. The Clean Water Act also establishes fines for spills that could go as high as $4,300 per barrel spilled if the government can prove gross negligence on the part of the “responsible party.” Funding of the OSLTF was set to terminate in 1995 and the Clinton administration took no steps to re-institute the tax in order to re-fund the OSLTF when it expired during the middle of his presidency.

In 2005, the Bush administration and the Republican controlled Congress passed the Energy Policy Act of 2005 (Act). Part of the Act re-instituted the funding for the OSLTF by re-instituting the tax and raised the ceiling of funding to $2.7 billion from the previous $1 billion. President Obama, who was elected in November 2004, had just taken his seat in the US Senate in January 2005. He originally took a mainstream party line approach and opposed the Act but due to immense pressure from his constituency in Illinois, due to the fact that there were many provisions in the Act that would help his home state, he finally relented and voted for it’s approval. The Act passed the senate by a vote of 74-26. Among the notables voting against the Act was Ted Kennedy, Joe Biden, Harry Reid, Hillary Clinton, Barbara Boxer, Chris Dodd, John Kerry, Dianne Feinstein, Jon Corzine, Patrick Leahy and in an odd twist of fate, John McCain. Needless to say, current Speaker Nancy Pelosi and Barney Frank opposed the Act in the House.

The purpose of the OSLTF is to help with oil spills. So why is the federal government screaming so loud about funding for this? Why is the Obama administration acting as though the taxpayers are going to get stuck with this bill if BP doesn’t pony up their checkbook here and now? The oil companies have been paying this tax for years in order to help with this kind of scenario. Presumably, the oil companies pass on the cost of the tax to the consumers which means we have already paid for part of this cleanup. So where’s the money? In short, the federal government borrowed it from the OSLTF for other uses.

Why is the media screaming so loud about how much is coming out of that well? Because the media has already tried and convicted BP and they want the government to impose the fines which are based on the number of barrels coming out. It’s true that at this juncture BP is considered the responsible party as a matter of law due to the fact that it’s partially their well. But the statute also provides that if a third party, such as Halliburton or Transocean is found to have caused the accident, the burden of paying for this would shift from BP to them. The other problem is that under the outdated rules originally promulgated in 1986, the OSLTF may only be tapped to the tune of $150,000,000 per year. So rather than change the rule and allow the government to use the rest of the $1.6 billion that is supposed to currently be in the fund (and thus require the feds to pay back the money it borrowed from the fund), their answer is to force BP to pay all economic claims (in addition to cleanup) despite the fact that the law Congress passed calls for a $75,000,000 cap due to the fact that the oil companies have already paid for that once in the form of a tax (which we ultimately paid).

The tax was raised from 5 cents to 8 cents per barrel in 2008 and currently both chambers of Congress are debating raising it even further to somewhere between 34 to 41 cents per barrel. So if Congress is going to lift the cap and make the responsible party pay for everything, what is the tax going to be used for? According to the OSLTF annual report in 2008, it might be needed to clean up old wells that are 20-50 years old where the responsible party can no longer be found; however, there doesn’t seem to be any estimate of just how many of these faulty old wells there are - or if there’s any for that matter.

So what is at stake here? Certainly there are concerns for our environment. But just as important if not more so is the age old American principle that one is innocent until proven guilty. While the strict liability rules in the statute may make BP liable at this time solely because it is partially their well, that doesn’t mean they caused the accident. The politicians and media have demonized these people and this company while fully admitting we don’t know what caused this yet. If we don’t know what caused it, how can we know who caused it? Rand Paul was right when he referred to this an un-American. Congressman Joe Barton of Texas was right when he called the forcing of BP to deliver $20 billion a shakedown. There is no legal authority for such an escrow. This was political blackmail.

Could there be any folks lurking in the shadows wanting the fingers to stay pointed at BP? Certainly Transocean has an interest in that status quo. Take a look at an organization called the Gulf of Mexico Foundation. This is a non-profit organization set up to promote a balance between environmental concerns, tourism, industry, etc. They are funded from different facets of businesses in the Gulf (including oil and drilling companies) but receive a majority of their funding from state and federal grants. All the links on their web site directed to oil companies no longer work. But one of the members of their board is Dr. Ian Hudson, who just happens to be Head of Corporate Responsibility and Environment for Transocean and Transocean hosted the Foundation’s most recent board meeting. Transocean has even hired a new lobbying group, Capitol Hill Consulting Group, to work the halls of Congress while this investigation is ongoing.

Halliburton doesn’t want the attention away from BP either. Could that be why their political donations spiked in May? It was the most they had contributed in a single month since two months before the 2008 election. And of the 10 current members of Congress contributed to, seven of them just happen to be on committees with oversight of the oil spill. Coincidence? Your guess is as good as mine.

Ever hear of Mitsui Oil Exploration Company or Anadarko Petroleum Corporation? They were BP’s partners in this well. Why hasn’t the media talked about them? If this is strict liability, why didn’t Obama strong arm some money from these companies? They owned 35% of the well. If BP has to pony up $20 billion, where’s their $10 billion?

So what is the skinny on this explosion? As someone who worked on a semi-submersible deepwater drilling rig for nearly three years, I can tell you something doesn’t smell right. If the reports are accurate and the cement job Halliburton place on the last section of casing collapsed and the pressure broke through the last casing joint, that would have started the process by releasing an unexpected surge of pressure. The story that BP decided to replace the drilling mud with seawater wouldn’t have mattered if the cement job had been properly performed. This bad cement job would probably ruin the well and make it commercially unusable (or at least cost a small fortune to fix). But once the gas begins to rise, it has to push everything above it, seawater or mud, from the well before it can surface. The crane operator apparently sounded the alarm just before the explosion when he saw mud spewing from the derrick (a sure sign a blowout is coming). Most of the people who died (driller, toolpusher, roughnecks, drill loggers, etc) were the very people who should have been on the drill floor trying to stop the blowout - except one - the BP “company man.” Apparently they were all downstairs at a party. Their well is about to blow up and they’re at a party? Why? That’s the 64 dollar question. We know what the party was about. They were giving the Deepwater Horizon a safety award for seven years without a lost time accident. Irony can be ugly but I can’t image seven years without a lost time accident on a rig this size. First, it makes me wonder how many minor accidents were covered up and not reported (I used to see that happen all the time and was even a party to it once). But if they covered up accidents, what else were they capable of covering up? Is it possible that there were problems on this rig that had never been reported to BP officials? Did the Transocean crew try to stop this blowout on their own without informing BP the well was coming in? I can’t think of any other reason the company man would be stuffing his face with cake just before the well blew up. A company man not being on the drill floor or addressing such a massive and life threatening problem would have been the equivalent of George Bush, upon being informed of the 911 attack, having told the secret service, “tell the secretary of defense to handle it, I’m going fishing.” It just doesn’t work that way. At the end of the day, no decision a company man could make should cause the blowout preventer to fail. What happened there? We won’t know the answer to that until the relief wells are drilled, the well is capped and the old blowout preventer can finally be brought to the surface and examined. That equipment was manufactured by Cameron Corporation, sold to Transocean in 2001 and owned, maintained and operated by Transocean all the way up to the explosion. Maybe BP isn’t providing answers because they don’t know either. Something’s not right here.

So why the witch hunt? Simple politics. The Obama administration needs to divert the public’s attention away from the economy and try to unite America. It’s hard to unite the country against an unknown enemy. When you start talking about BP, Halliburton, Transocean, Cameron, Anadarko and Matsui, it gets confusing and Obama likes thing simple. They need to point a finger at a single scapegoat and a foreign company got tagged. Four of the other five companies are American. It also provides the administration with a platform from which to launch their Cap and Trade energy policies. But make no mistake, it amounts to political extortion and is as un-American as it gets. Joe Barton got it right and John Boehner should be ashamed of himself for threatening Barton and making him apologize. In the end, BP may be the culprit but when we start “convicting” people or companies before we even know what happened, then the principles upon which this great nation were founded have been trashed and the whole country loses.