Make Them Pay

How to calculate what BP owes America.

"I'm worried to hell and back, so is everybody else," says Roland "Mac" McRae, 74, owner of the Cedar Point Fishing Pier on Alabama's Gulf Coast. We spoke by phone on May 29. His business leases time on a fishing pier located just a few hundred miles from the Deepwater Horizon offshore oil rig, which on April 22 caught fire and sank, unleashing what is now the largest and most destructive oil spill in U.S. history.

As local fishermen stay home and business plummets, McCrae tries not to think too far ahead. "I don't even go there. All my life, I've had a little jingle in my pocket," he says. "To me, life's not worth living if you don't have a little jingle in your pocket." McRae is one of an estimated 14 million people living along the Gulf of Mexico, millions of whom are likely to be affected one way or another the oil spill. "When they finally close that well, if they can," he reflects, "the entire ecology of the Bay and the Gulf of Mexico will never be the same."

Ecology isn't the only unknown. More than 20 years after the Exxon Valdez dumped 11 million gallons of crude into Alaska's Prince William Sound and caused billions in damages, the United States is again facing a massive oil spill and a vast undetermined price tag. But this time, the rules are different. The legal system, also entering uncharted waters, must now grapple with two difficult questions in fielding the concerns of people like McRae. The first, of course, is: Who's to blame? The second is: Who will pay?

The first answer is easy; the second, not so much.

BP, of course, is taking the blame. The company was leasing the rig from Transocean, the world's largest offshore drilling company, and managed operations with subcontractors such as Halliburton, when the disaster occurred. The explosion and sinking of the rig has thus far released between 18.6 million gallons and 29.5 million gallons of oil into the blue waters of the Gulf, according to the latest government estimates. On its website, BP says it "takes full responsibility for responding to the Deepwater Horizon incident"; however, the company has already attempted to share the blame with its contractors during intense questioning at a congressional hearing.

Since the Exxon Valdez disaster, a new suite of rules and regulations has supposedly made it easier for victims of oil spills to claim damages, but the new system also limits the punitive damages and payouts communities can expect. "Before, if the oil doesn't touch you, then it didn't matter how much economic losses you suffered," says David Oesting, a lead attorney on the Exxon Valdez case with the law firm Davis Wright Tremaine. "That's all different now."

In 1990, Congress passed the Oil Pollution Act, adopting some recommendations of the Alaska Oil Spill Commission that made companies liable for economic harms from a spill without a court decision. To avoid the chaos that followed the Exxon Valdez spill, when 30,000 fought for compensation in hundreds of lawsuits, the new law streamlined the process. Now, BP (along with any other parties deemed "responsible") is automatically liable and must pay for all cleanup costs and damages to natural resources, property, and revenue caused by an oil spill.

Yet the Oil Pollution Act also caps damages to $75 million for spills from vessels, or $350 million from offshore facilities (it is not clear yet which limit applies to the mobile Deepwater Horizon rig). Once this amount is exhausted, claimants may receive payments up to $1 billion per incident (spill) from something called the Oil Spill Liability Trust Fund, which is financed through a tax on petroleum imported or produced in the United States.

In order to even be eligible for such payments, claimants must keep a tidy tally of both damages incurred and lost revenue sources. A hotel without customers, national wildlife refuges without animals and patrons, and states with massive, oil-related clean-up costs -- all must place a dollar value on their harms and petition for compensation. A subpoena may be of less value than a calculator, says Oesting who is already involved in the BP case. "If I was [a claimant], I wouldn't hire a lawyer, I'd hire a very good forensic economist to set your losses and present your claims to BP," he says. "If they don't pay it, then go to the [Oil Spill Liability Trust] Fund. The government can duke it out with BP."

Yet limits on liability do not apply if the responsible parties committed gross negligence, wilful misconduct, or violations of government regulations. This seemed like a foregone conclusion by many in Congress even before Attorney General Eric Holder announced on Tuesday the criminal and civil investigations of BP and others for violations of the Clean Water Act, the Endangered Species Act, and the Migratory Bird Treaty Act and the Oil Pollution Act of 1990 -- something the government is almost certain to find.

Even with criminal charges, however, Congress can intervene by removing the $75 million cap. And it remains to be seen whether the death of 11 workers on the Deepwater Horizon could lead to charges of manslaughter, or worse, against BP. It turns out that even the current law -- which has never been tested in a disaster of this magnitude -- is not such a helpful guide to predicting what will happen next.

Perhaps the biggest wild card is the possibility of lawsuits outside the purview of the Oil Pollution Act. Anyone can sue and claim damages in the courts, invoking laws that cover such incidents; most suits against Exxon were by communities and businesses. Such claims would be subject to no mandatory caps -- allowing juries to potentially exact a steep toll on BP in court.

For its part, BP has stated in news reports and congressional testimony that it expects to exceed the $75 million cap  without seeking reimbursement from the Oil Spill Liability Trust Fund. In other words, either out of a sense of responsibility or a last-ditch effort at damage control, the oil giant has  committed to paying damage claims without considering the cap (if not necessarily the true cost of damages). This does not seem to have mollified Congress, which is already debating raising liability to $10 billion. Elected officials, meanwhile, are vowing financial retribution: Louisiana Sen. Mary Landrieu pledged last week that BP will repay "every penny of loss to affected individuals, businesses and communities, as well as the American taxpayer."

To date, although BP says it is paying off all "legitimate" claims, only $37 million had been distributed to claimants, primarily for those in immediate dire straits. "The primary focus is on direct impacts and people's ability to earn income," says David Nicholas, a BP spokesman in Houston. "We're pushing them through as quick as possible." Of the 26,000 or so claims submitted as of May 30, the firm has paid out about 12,000, typically to shrimpers, boat captains, and others affected by government restrictions on fishing grounds.

Those paid for lost income this month are eligible next month, and much larger payments are still due for businesses and natural resources ruined by the spill. Nicholas says the total cost of the operation for the first month of the spill is at least $930 million. Yet the level of compensation so far, most observers think, is extraordinarily low, given the size of the region's population and the value of its fisheries.

BP's legal strategy has yet to emerge. For now, it has set up a website to pay out immediate claims. One prediction is that BP will settle many of the outstanding costs as soon as possible, and allow bad press to recede for as long as 2 to 3 years, before attempting to fight any cases and paying out claims of pending lawsuits.  

For McRae, at the Cedar Point Fishing Pier in Coden, Alabama, his business may not survive to see the fight. Business is down 50 percent compared to last May. He's already submitted claims to BP for the loss in customers, but says he hasn't heard back and is not optimistic after attending a meeting with company officials in the neighboring town of Gulf Shores. An accountant at the meeting representing a local condominium development raised his hand to say that he submitted 1,700 pages documenting his losses, and BP replied requesting more information. "Does that tell you they are going to do the right thing?" asks McCrae. "They are not going to do the right thing."

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Drone Wars

The Obama administration won't tell the truth about America's new favorite weapon -- but that doesn't mean its critics are right.

It's been a bad week for drones. On Friday, U.N. official Philip Alston announced he would be asking the United States to move the controversial, Central Intelligence Agency-run program under the aegis of the military, and international law. He joins a growing chorus of people opposed to the use of drone airstrikes to target militants ensconced in Pakistan's Federally Administered Tribal Areas (FATA), on legal, humanitarian, and operational grounds. (Alston is at least more informed than most drone foes in that he recognizes that the drone strikes in Pakistan's FATA are CIA-led covert operations rather than "military strikes.")

The anti-drone argument goes like this: Because drone attacks kill innocent civilians and violate Pakistan's sovereignty, they are deeply and universally despised by Pakistanis, and contribute to deepening anti-U.S. sentiment in the country -- enmity that could boost terrorist organizations' recruitment and eventually force Pakistan's military and civilian leaders to abandon their cooperation with the United States.

During his testimony before the U.S. Senate Foreign Relations Committee in May 2009, David Kilcullen, a former counterinsurgency advisor to Centcom commander Gen. David Petraeus, said it was time for the United States to "call off the drones." Later that month, Kilcullen and Andrew M. Exum, who served as an Army Ranger in Iraq and Afghanistan from 2002 to 2004, published a provocative editorial in the New York Times, titled "Death From Above: Outrage from Below," in which they estimated that over the "past three years" drones had killed just 14 "terrorist leaders" at the price of some 700 civilian lives. "This is 50 civilians for every militant killed," they wrote, "a hit rate of 2 percent." Their conclusion? Drone strikes produce more terrorists than they eliminate-an assertion that has become an article of faith among drone-strike opponents.

It would be a damning argument -- if the data weren't simply bogus. The only publicly available civilian casualty figures for drone strikes in Pakistan come from their targets: the Pakistani Taliban, which report the alleged numbers to the Pakistani press, which dutifully publishes the fiction. No one has independently verified the Taliban's reports -- journalists cannot travel to FATA to confirm the deaths, and the CIA will not even acknowledge the drone program exists, much less discuss its results. But high-level Pakistani officials have conceded to me that very few civilians have been killed by drones and their innocence is often debatable. U.S. officials who are knowledgeable of the program report similar findings. In fact, since January 1 there has not been one confirmed civilian casualty from drone strikes in FATA.

Not only do drone opponents rely upon these fictitious reports of civilian casualties, they also tend to conflate drone strikes in Pakistan with air strikes in Afghanistan, lumping the two related but very different battlefields together as one contiguous theater. They also conflate different kinds of air strikes within Afghanistan.

These distinctions matter, a lot. In Afghanistan, it is an ignominious truth that hundreds of civilians are killed in NATO airstrikes every year. But most of the civilian casualties in Afghanistan have not stemmed from pre-planned, intelligence-led attacks; rather, civilians are most likely to die when troops come into contact with the enemy and subsequently request air support. This is because when it comes to air strikes, NATO forces in Afghanistan have a limited range of air assets at their disposal. As a result, when troops come into contact with insurgents and call for air support, they get the ordnance that is available, not the firepower that would be best suited to their needs. Sometimes large bombs are dropped when smaller ones would have been better, and the risk of civilian casualties increases accordingly.

By contrast, drone airstrikes are pre-planned, intelligence-led operations, and are usually accomplished with minimal civilian deaths -- as even Human Rights Watch acknowledges. They are the product of meticulous planning among lawyers, intelligence officers, and others who scrupulously and independently confirm information about potential enemies, working to establish a rigorous "pattern of life" to minimize the deaths of innocents. Others in the Air Force, using a classified algorithm, estimate the potential for civilian casualties based upon a variety of local data inputs. While one should not be blasé about the loss of any civilian life, it is important to note that the different kinds of air operations are not created equal.

How does the situation in the air over Afghanistan compare to that in Pakistan? The short answer is that we don't know -- drone strikes in Pakistan are conducted under the auspices of the CIA and occasionally the Joint Special Operations Command, and are covert operations that the United States government does not even acknowledge take place. (If you've seen footage of civilian casualties at all, they're in Afghanistan, not Pakistan.) But if we know little about the drone strikes, we know enough about the alternative means of eliminating terrorists in FATA to know that they're probably worse. Pakistan has no police in FATA to arrest them. The Pakistan army is now in its 13th month of sustained combat in the region, an effort that has flattened communities and displaced millions but done little to chip away at the insurgents' strength. Drone strikes may not be perfect, but they're likely the most humane option available.

Of course, the actual impact of the drone strikes is only part of the equation -- the perception of them in Pakistan matters enormously as well. But here, too, the conventional wisdom -- that Pakistanis hate the drone strikes, and consider them an affront to their national sovereignty -- is not entirely correct. Pakistan's government makes a big show of opposing the strikes, but it's not much more than political theater. In fact, the United States secured permission to launch strikes from then President Pervez Musharraf in 2006 -- Musharraf was adamant at the time that the strikes be confined to the FATA and they have been. Musharraf also warned U.S. President George W. Bush beforehand that Pakistani military and civilian officials alike would protest the strikes, out of domestic political necessity -- it was nothing personal. Presidents Asif Ali Zardari and Barack Obama have inherited this combination of operating agreements and kabuki politics.

What about the Pakistanis in the regions where the strikes are occurring? The truth is, we don't really know what they think. Collecting reliable and rigorous opinion data in FATA is difficult -- the lack of a current census, the influx of Afghan refugees and emigration of FATA natives fleeing the unstable region makes it nearly impossible for even the best polling firms in Pakistan to draw a scientifically defensible sample of FATA residents. As a result, all we have is a smattering of anecdotal accounts, which vary depending upon who is asked, and where, when, and how they are interviewed. On one hand are those who rubbish the Pakistani media claims of civilian casualties and assert that the drones effectively kill militants but not civilians. On the other are outraged residents who live in fear of the constant buzzing of the drones circling above. It's unreasonable to extrapolate any kind of majority opinion from either one of them.

What is clear enough, however, is that the drone strikes, however unpopular they may be, are likely to be more popular than the realistic alternatives: the Taliban's violence or the Pakistani army's operations, which have displaced millions. Mosharraf Zaidi, a Pakistani journalist and commentator, vividly captured the complex reality in his May 11 piece in The News: "The relative popularity of drones is almost as emphatic as their absolute unpopularity. Pakistani military operations have a reputation in the region now, for being so brutal, that entire parts of towns are destroyed. Drones that destroy one or two homes at a time, obviously represent less damage, and therefore, an option that is preferable to the military's artillery campaigns."

That's why, if the United States does pull its drones out of FATA, Pakistanis will have two options. Either the government simply gives up the fight, or the Pakistani military -- which is already stretched thin -- may have to pick up where the Americans leave off. After the Pakistani army's arduous battle to wrest control of the Swat Valley back from the Taliban beginning in earnest in 2009, Musharraf argued that the United States should give Pakistan drones to pull off future strikes without the massive footprint of a ground force operation. After subsequent requests were rebuffed, Pakistan first sought to buy drones from Italy, but now plans to manufacture them locally.

Nevertheless, American and Pakistani citizens do need to weigh the relative costs and benefits of drone attacks. Doing this requires some concessions from the U.S. government. First, it should abandon the absurd claim that it does not conduct drone strikes -- since Google Earth images of U.S. drones at the Shamshi airbase in Baluchistan were published in 2009, the charade hardly seems worth the effort. Second, it should provide evidence of what exactly the drone attacks have produced so far: who has been killed, and how important those people were to the enemy's capabilities. Drone critics can surely question and even reject the process by which individuals are declared "fair targets" and the legality of these extrajudicial killings. But such a debate can only happen when the U.S. government clarifies how targets are selected and vetted.

Until the U.S. government owns these attacks and presents information about their outcomes, at best unrealiable and at worst fabricated civilian casualties figures will dominate the drone debate. And that would be the real tragedy -- it could force policymakers in the United States and Pakistan to discard the least bad tool at their disposal.

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