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The Blog

Crikey!

The Aussies would sum it up in one word; “CRIKEY!”

The bloviating popinjays on Pennsylvania Avenue are still strutting in full regalia and spouting complete nonsense. They are verbal wells out of control. Will someone please develop a top-kill for them! They continue to bang on about the limitation of liability provisions in the Oil Pollution Act of 1990. They are also promulgating burdensome regulations for explortion activity on the Gulf of Mexico shelf; what are referred to as shallow water wells. What on earth are they doing?

For over a month, President Obama has made statements similar to the one he made last week. “BP is responsible for this horrific disaster, and we will hold them fully accountable on behalf of the United States as well as the people and communities victimized by this tragedy.”

Interior Secretary Salazar said “Our job is basically to keep the boot on the throat of BP”, and then White House press secretary Robert Gibbs had the good grace to reiterate that pleasant Nazi-era image. I’m waiting for brown shirt uniforms to emerge.

On June 1st, Homeland Security Czarina Janet Napolitano told BP to get its checkbook out because it has a big bill headed its way.

Not to be outdone, Attorney General Holder (he who refuses to acknowledge the 2nd amendment for what it is, and he who arranged the release of the FARC terrorists) stepped up to the spill and announced a criminal investigation. The government must “ensure that anyone found responsible for this spill is held accountable,” Holder said, after touring the Gulf and meeting with federal and state prosecutors. “That means enforcing the appropriate civil — and, if warranted, criminal — authorities to the full extent of the law.”

Holder said Justice Department lawyers were investigating a wide range of possible violations under a number of federal statutes, including clean water laws and the Endangered Species Act, which provides fines and prison time for people found guilty of harming or killing wildlife.

My friends, this is big government at its absolute worst. The Endangered Species Act envisages jail time for people who wantonly kill endangered species….picture a guy popping baby bald eagles out of their nest from his kitchen window. A little time at the crow bar inn might do him some good. But putting someone in jail over this spill? CRIKEY!

While the Administration prevaricates, it is doing absolutely NOTHING to help resolve the problem or contain the spill. Louisiana Governor Bobby Jindal has been asking for specific help for weeks. He has been invited to a number of meetings which have proven to be wonderful photo ops, but his requests for actual action have largely been ignored. So while our Administration talks tough and blows smoke, it has been absolutely useless in lending a constructive hand. And now it has created an adversarial relationship with the one company that has the best chance of finding a solution to the problem.

Have you seen BP’s share price? How much of that precipitous fall has been caused by traders shorting its shares, following the United States government’s announcement that it is holding a Gestapo boot to BP’s throat and is now investigating criminal charges?

In the insurance world, political risk insurance has been available for decades. Coverage can be purchased to protect the seizure of assets (or suspension/termination of operations) by “foreign” states or entities in countries in which western companies are operating. This coverage has not been available in the US or UK, as the view has long been that the “problems” were in developing nation states in Latin America, Asia, the Middle East, and in former Soviet states.

I gave a speech in Dubai this past February in which I suggested that the paradigm was shifting, and it might be viewed as supreme western arrogance and folly to continue to view business operations in the US and UK as somehow immune to arbitrary and capricious governmental acts that adversely impact the right to conduct business. Well folks, we have arrived. CRIKEY!

This administration is no better than a developing world puppet regime. Doing business in the United States should now be considered with a view that an inherent political risk exists. Any overseas entity considering an investment in the US will have to add a “risk premium” into its projected return on investment in consideration of the fact that the United States government may take action that adversely impacts the investment. What have we wrought?

Last week’s announcement by Obama that all drilling operations in the Gulf were being suspended was one of the biggest blunders of this ill-fated Presidency. In effect, the Administration last week:

• extended the moratorium on new deepwater offshore drilling permits for six months while a recently appointed presidential commission investigates the Deepwater Horizon oil spill in the Gulf of Mexico,

• announced that it would not consider applications for permits to drill in the Arctic until 2011; that includes the five exploratory wells that Shell Oil was planning to start drilling this summer off the coast of Alaska in the Chukchi and Beaufort seas,

• cancelled the pending lease sale in the Gulf of Mexico and the proposed lease sale off the coast of Virginia, and

• suspended action on 33 deepwater exploratory wells currently being drilled in the Gulf of Mexico.

On June 3rd, the MMS confirmed that ALL drilling in the US Gulf of Mexico was suspended. This advice was then contradicted by its parent, the Department of Interior. It appears that drilling on the shelf may continue, but only after confirmation that the drilling plans conform to new (and yet to be fully disclosed) MMS safety regulations.

30% of the oil and gas produced in the United States comes from the Gulf of Mexico. Tens of thousands of jobs will be lost because of these decisions. The impact at the pump WILL be felt. The impact on the American economy will be one of consequence. In short, to virtually halt oil and gas operations in the US Gulf of Mexico, and stop progress off the East Coast and Alaska is stuff of cloud- cuckoo-land.

So what on earth are they doing up in Washington D.C.? Your guess is as good as mine.

CRIKEY!

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