After BP's financial travails -- falling stock, mounting claims -- financial analysts everywhere are uttering the dreaded B word. Incredibly, it seems that an energy company recently valued at $200 billion could go bankrupt.
As BP executives reiterate pledges to pick up the tab for stained beaches and soiled pelicans, another messy industrial cleanup is unfolding a thousand miles to the north, in the Midwest's auto-manufacturing belt. General Motors and Chrysler are the chief culprits there. The automakers own hundreds of contaminated properties where they once made cars and car parts.
Like so many oil-stained communities along the Gulf, former auto towns throughout the Midwest are waiting for a thorough going environmental cleanup. And like the Gulf communities, they hope that cleanup will help bring about a full economic recovery. Some have been waiting for years, even decades, for GM and Chrysler to finish the job.
Will the communities of the Gulf Coast ultimately fall into a similar state of limbo? Right now, the daily stress and uncertainty demands their energy, but in the months ahead, many may learn a lesson that Midwesterners have known for a long time: The difficulty of making a big corporation pay for its mess increases exponentially once it declares bankruptcy.
Herein lies a cautionary tale for Congress, environmentalists, and the people of the Gulf Coast. As much as they want BP to pay through the nose, they should beware a bankrupt BP, which could use bankruptcy laws to shed its responsibility to pay for environmental cleanup.
"If GM doesn't pay, there's a real danger that the cleanup costs will fall back on the taxpayer." That's Kevin Smith speaking. He's the former mayor of Anderson, Indiana, a city of 50,000 that made millions of starting motors, horns, and headlamps for GM. Smith worked closely with GM to clean up nearly a dozen former plants, but work stopped when GM went bankrupt. Now, the city is seeking $9.2 million from the automaker to finish the job. The court handling GM's bankruptcy may award the funds; it may not. Either way, someone has to clean up the polluted 90-acre field where that headlamp plant once stood.
A former auto plant does not look much like a white-sand beach, but the net effect is the same: An asset converted to a costly albatross. An oily albatross, if you want to mix metaphors.
Unlikely Pairing: A bankrupt BP might delay or seek to avoid paying for environmental cleanup along the Gulf Coast (below, AP), just as General Motors has left this contaminated factory site in Anderson, Indiana, untouched (above).
"When companies leave huge environmental pollution from their operations, local governments suffer the brunt of the problems," says Matt Ward. He's the policy director for the Mayors Automotive Coalition, a group of 50 municipalities that have banded together to rebuild communities devastated by plant closures.
"Local communities have to deal with the contaminated property as well as lost jobs, lost tax revenue, increasing foreclosures, demands for social and poverty services, and the stigma that drives away future economic development."
When the companies responsible go bankrupt, cleanup efforts are often put on hold, prolonging the crisis. "When the company has no resources, it is bad news for communities," Ward concludes.
BP is plenty different than the American automakers, of course. For one thing, it has no problem making a profit. And unlike GM and Chrysler, it never owned the waters and beaches its crude has fouled.
But when it comes to the all-important question of who pays, a bankrupt BP may quickly start to resemble GM and Chrysler, which have been widely criticized for insufficiently funding their cleanup obligations.
"We're still trying to calculate the environmental cleanup costs that GM and Chrysler have left to be borne by the public," notes Jackie Gardina, an attorney, professor at Vermont Law School, and authority on the environmental consequences of bankruptcy.
If BP declares bankruptcy, its oft-repeated promise to "pay all reasonable claims" goes out the window.
"If BP were to file for bankruptcy, the government will be unable to hold the company fully accountable for the as-yet-unknown costs of this unprecedented environmental catastrophe," Gardina says. "Bankruptcy courts struggle to find a balance between the 'polluter pays' principle of our environmental laws versus the bankruptcy."
Gardina says that only Congress, not the courts, can truly make corporate polluters accountable. It can arrange liens on BP's assets or revise the bankruptcy code to provide less wiggle room for corporate polluters. Moreover, she notes that the Obama administration can request a "security interest" in BP's property to guarantee the costs associated with the spill.
Bottom line, Congress and President Obama must close the loophole that makes bankruptcy so useful for BP and other corporate polluters.
Otherwise, we may one day speak of the Gulf Coast as the new Rust Belt -- the Tar Belt, if you will.
Indiana's story is a sad one because the damage is more subtle and so much easier for the federal government to bypass in favor of top-drawer environmental concerns.
Except that the 20 billion escrow account is outside the bankruptcy protect and will still have to be paid. Thank you, President Obama, for those Chicago style shakedowns.
At least here we won't have a perfectly healthy company (similar to Dow, years ago) the uses the bankruptcy laws to get out of its responsibility for damage it caused.
And, what about oil company liability for the millions of underground storage tanks at abandoned gas stations that leaked in to the ground over the decades. Care to cover THAT one?
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When is that story gonna be written? How Big Enviros are being paid (via foundations and CEERT) to greenwash BP, Chevron, Shell, Goldman Sachs and other wilderness-killing Big Solar and Big Wind ventures, while crushing and/or ignoring democratically-owned clean energy solutions?
Moreover, there are other crises on the horizon for BP. See these recent reports:
"BP FACES LOCKERBIE ACCUSATIONS"
"Hillary Clinton, the US secretary of state, pledged today to look
into demands from a group of senators for an investigation into
charges that BP lobbied for the release of the Lockerbie bomber as
part of an oil-for-terrorist deal." July 14, 2010.
http://bit.ly/aTituH
********************************************
"BP TROUBLES DEEPEN WITH BUNCEFIELD VERDICT"
"Beleaguered BP will find its reputation further tarnished tomorrow
when a British criminal court passes sentence on a company it half
owns over safety breaches connected with the worst explosion and fire
since the second world war." July 15, 2010.
http://www.guardian.co.uk/business/2010/jul/15/bp-buncefield
Unfortunately, that fund will pay for work at only some--not all--of GM's former manufacturing sites. The one I describe in Anderson, Indiana, is not part of the deal.
The Mayors Automotive Coalition is pushing to Chrysler to set up a similar trust fund. Maybe BP should, too.
A question: You mention GM's specific site. What specific site(s) belong to Chrysler?
thanks
Elsewhere, I know of Chrysler cleanups in Detroit and Canton, Michigan, and Dayton and Cleveland, Ohio. The one in Dayton has been especially contentious; a school had to be moved because of it. The other cleanups are in all different stages. In some cases, the plant is still operating. On the other end of the spectrum, the site is an old landfill that Chrysler buried waste in years ago.
I'm sure there are other sites, too, that I don't know of. Please do point them out if you of them.
chris