The Positive Voices

BP’s catastrophe in the Gulf of Mexico demonstrates how risky oil and gas drilling really is. For the 11 crew members killed in the Deepwater Horizon explosion, Gulf communities, ocean water and wildlife, the impacts were immediate. The long-term repercussions will also be devastating. Stopping the leak, cleaning up the mess, and restoring the economic viability to the Gulf’s many industries that rely on clean, healthy water is going to be an enormous challenge. The multi-billion-dollar question is: How are we going to pay for it? The answer should be easy. BP is responsible for this disaster. BP should pay for everything-- the cleanup and damages. On the surface, it may seem like BP agrees. In congressional testimony and a series of expensive ads, BP has assured us its efforts in the Gulf will “not come at any cost to the taxpayers.” But the facts are murkier. Taxpayers already underwrite billions of dollars in generous subsidies for oil and gas companies. We’ve been padding their bottom line for years, essentially pre-funding the clean-up. In the last four years, BP has recorded $83 billion in profits. Its first-quarter profits this year averaged $66 million a day. At the same time, it has enjoyed tax breaks and other giveaways from the federal government. If we don’t start whacking these tax breaks and subsidies, taxpayers stand to lose roughly $53 billion in royalty revenue on late-1990s Gulf leases, and $36 billion by 2020 on just a handful of the subsidies oil companies receive. And when it comes to the BP oil disaster, taxpayers could also be shelling out billions in damage liabilities. Existing law requires BP to cover the costs of cleanup, but only requires the company to cover damages up to $75 million. This disaster is already larger than the Exxon Valdez fiasco, and damages are expected to total tens of billions. Not surprisingly, protecting its subsidies and lax regulations is a top priority for BP. Like other oil companies, BP fields an impressive team of lobbyists in Washington, having spent $41.2 million on lobbying since 2005, according to the Center for Responsive Politics. The list includes former staff from the White House, Office of Management & Budget, Federal Trade Commission, House Energy & Commerce Committee, Senate Commerce, Science, & Transportation Committee, and the Employment Standards Administration. BP spent about $3.5 million on lobbying during the first three months of 2010, working on bills such as the Oil Pollution Prevention and Response Act of 2009, the Oil Spill Prevention Act of 2009, and the Clean Water Restoration Act. Topping BP’s list of legislative priorities, however, is the so-called climate bill, American Clean Energy and Security Act of 2009. BP, like other energy companies, funnels most of its campaign contributions to members of the committees with jurisdiction in Congress, such as the House Energy and Commerce Committee, which has received $90,500 from BP over the last three election cycles. Other big recipients include members of the House Resources Committee, which received $69,000 during the same period, and members of the Senate Government Affairs Committee, who got $114,251. BP’s claim that taxpayers will pay nothing is likely to be little more than doublespeak. There’s no evidence that protecting taxpayers, the environment, or affected communities have ever been their concern. Instead of taking BP’s word for it, Congress must take action. It’s time lawmakers wake up and stop kowtowing to oil and gas interests. The gravy train must end. Big Oil must be held accountable and BP must pay.

Compulsive gamblers are perpetually looking for the big score. Always thinking that the next card will draw that inside straight or the last card will turn their garbage into gold. Casinos have a name for these people--suckers. Well, Uncle Sam has pushed more than $8 billion into the pot, gambling on big returns from the nuclear power industry. Sadly, we know where this ends. Southern Company is salivating over an $8.33 billion conditional loan guarantee announced this week for the construction of two reactors in Waynesboro, Georgia. The “lucky” backer of that long shot bet? The U.S. taxpayer. If the current state and history of the nuclear industry tells us anything, signing off on this tentative agreement will deal us a losing hand. This will be the first Treasury-backed loan guarantee for a new nuclear reactor under the Department of Energy Loan Guarantee Program. The program was created in 2005 to distribute loan guarantees to innovative energy technologies. While the program covers a range of emerging technologies, other mature industries--like coal and nuclear--are also eligible. Currently, the program has an overall cap of $51 billion, with $18.5 billion in loan guarantee authority earmarked for nuclear reactors. Adding to the program’s already significant federal financial risks, President Obama’s fiscal year 2011 budget proposed taxpayers go all in on this nuclear gamble. To begin funding the industry’s so-called “nuclear renaissance,” the administration’s budget has proposed tripling the amount of loan guarantees for nuclear power to $54.5 billion.   But even before Obama had proposed this increase, nuclear power was belly up to the bar for federally backed loan guarantees. With extremely high capital costs, significant technology risks, and a track record of project defaults, the industry can’t get anyone on Wall Street to back them. Even when the market couldn’t get enough exotic, high-risk investments a few years ago, nuclear power was kryptonite to investors. To date, the nuclear industry has applied for $122 billion in loan guarantees--far surpassing any other loan guarantee applicant. With numbers this high, these loan guarantees could cause a huge financial hangover. The nonpartisan Congressional Budget Office considers the risk of default on the part of the nuclear industry to be very high--above 50 percent--and payments for defaults would come directly from the Treasury. Additionally, DOE loan guarantees carry an extremely high risk because they can cover the entire value of a loan, worth up to 80 percent of a project’s total cost--terms far better than any private lender would provide.   In the case of Southern Co., Obama is promising the full faith and credit of the U.S. Treasury behind a $14 billion dollar project that already has serious design flaws, even though construction has yet to begin. The story is much the same for the other nuclear projects that are lining up for loan guarantees. In many cases cost estimates have doubled and there is turmoil between project owners. And many of the new U.S. reactors rely on designs that are in financial shambles in other parts of the world to boot. If the nuclear industry is a solid investment, then it should be able to receive the backing of Wall Street. For over a half-century, taxpayers have propped up the nuclear industry with more than $100 billion in subsidies. It’s time for the gravy train to stop. Facing massive budget deficits for as far as the eye can see, taxpayers shouldn’t be forced to gamble billions of dollars backing loans for an industry plagued with financing, design, and construction delays and a track record of defaulting on loans. Ryan Alexander is president of Taxpayers for Common Sense, a nonpartisan federal budget watchdog. www.taxpayer.net