Slight of Hand by Ira Scwhartz

"Scientists say they have developed a car that can run on water. The only catch is, the water has to come from the Gulf of Mexico." -Jay Leno

That was the way Jay Leno opened the “Tonight Show” several weeks ago. He continued..

"Well, folks, here's the latest update. I guess this is good news. BP officials say the 'top kill' plan is working. The bad news — BP officials are a bunch of lying weasels."

It appears that even the entertainment industry can see through the smoke screen BP has put up and by the level of applause from the crowd most of us do also. So why is it so hard to get a straight answer out of BP? The only thing I can think of is the BP spin machine is working about as well as their Deepwater Horizon drill rig. Here are the latest figures from the Gulf.

As of June 15th scientists estimate that around 60,000 barrels of oil a day is spilling into the gulf from the remains of the BP Deepwater rig Horizon. That’s 2.5 million gallons. It is estimated that 25,000 barrels a day is being captured by BP which still leaves 35,000 barrels left to pollute the American gulf and southern east coast.

So what really happened out there in the Gulf of Mexico? It appears, according to an AP report by an oil pipeline safety expert, a methane bubble escaped and made it to the surface. The expert explained that deep beneath the sea floor, methane gas is in a slushy, crystalline form. As the workers removed pressure from the well and introduced heat, the cement seal around the pipe destabilized, creating a gas bubble. It intensified and grew, breaking through the rig's various safety barriers. Once it reached the surface it ignited and exploded. A device called a “Blowout Preventer” was supposed to protect the rig from just this kind of an accident. So why didn’t it? A “60 Minutes” interview with a survivor of the explosion, Mike Williams, sheds light on that story.

Mr. Williams told “60 Minutes” that the Blowout Preventers seal was damaged in an accident weeks before the explosion. When a Transocean supervisor (Transocean owns the Deepwater rig run by BP) was told of the problem he said it was “no big deal” and operations continued. Mr. Williams continued that BP and Transocean managers had been arguing over who was in charge in the hours before the spill, disagreeing on how to seal the well.

Dr. Bob Bea, a UC Berkeley engineering professor interviewed by “60 Minutes,” told them that the pre-accident problems with the blowout preventer should have been fixed immediately. He continued that when BP won the argument about how to seal the well, the methods they decided on, while faster, were more dangerous than Transocean’s, and may have caused the blowout.

But while BP is assuredly the organization who pulled the trigger let’s just see who it was that loaded the gun.

The organization that is responsible for regulating all off shore drilling of oil and gas in US waters is the Minerals and Management Service, a section of the Department of Interior. This departments duel responsibility was:

1) To entice companies to drill for oil and gas in United States waters, then collect the royalties from the minerals, oil and gas, they extracted.

2) To insure that said industry followed the regulations established for off shore drilling by the United States.

I don’t know about you but that sounds like a huge conflict of interest to me. Is it any surprise that several disturbing stories about the MMS have begun surfacing since the Gulf disaster happened? One article published in the Wall Street Journal lists a number of instances where the MMS had pointed out potential safety problem in the industry, urged the industry to consider doing something about it, but in the end gave in to the industry's decisions and in many cases ignored the recommendations it was given by the independent experts commissioned to study the problems. One of those problems involved “Blowout Preventers”. The very piece of equipment whose failure lead to the explosion and death of 11 workers on the Deepwater Horizon.

So it comes as no surprise that the Minerals and Mining Service Director, Elizabeth Birnbaum, decided at the end of May to resign from her position. Soon after Interior Secretary Ken Salazar announced, in a press conference, that Ms. Birnbaum’s department, the MMS, was going to be broken up into small, more manageable sections. It appears that Ms. Birnbaum will now be made the scapegoat for the last two administrations failure to properly monitor one of its major departments. Damage control at its best.

BP has also been doing some damage control of its own. Tony Hayward, Chief Executive of BP and until recently the face of the Gulf oil spill, has been replaced by Robert Dudley. BP hopes that Dudley, an American and Mississippi native, will be able to repair some of the damage the cold and uncaring Hayward caused. Somehow I don’t see that happening.

Now a Federal judge has blocked the White House’s six month moratorium on off shore drilling. Martin L.C. Feldman, U.S. 5th District Court in New Orleans stated in the text of his injunction that,

“The court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium,” Feldman said in his 22-page decision. “The blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.”

I guess Judge Feldman has yet to watch the news or simply look out his window at all the fishing vessels sitting in the harbor growing barnacles on their hulls. Or is it the Judge is more concerned about keeping “Big Oils” money in Louisiana then the death of 12 people and the continued destruction of the gulfs eco system.

This moratorium is needed until the Federal Government can get the proper safeguards in place to insure this will never happen again. To those that say, “The big oil companies will just leave and drill somewhere else” I say let them. There is still a lot of oil under the Gulf of Mexico and those greedy, bloodsuckers that run the big oil companies will be tripping over each other to file their permits as soon as the moratorium is lifted.

While all the world is distracted by the Gulf disaster BP is quietly preparing to begin drilling off the Alaska Coast. A NY Times article explains that BP is about to start drilling “two miles under the sea and then six to eight miles horizontally to reach what is believed to be a 100-million-barrel reservoir of oil under federal waters.”

How is this project allowed to continue while all others have been temporarily halted? It appears that BP is exempt, federal regulators have decided this is an “On Shore” drilling project despite the fact it is located three miles off the coast of the Beaufort Sea. The regulators explanation is it is “on Shore” because it sits on an artificial island — a 31-acre pile of gravel in about 22 feet of water — built by BP.

But this irresponsibility goes even further than semantics.

I now quote the article, “Rather than conducting their own independent analysis, federal regulators, in a break from usual practice, allowed BP in 2007 to write its own environmental review for the project as well as its own consultation documents relating to the Endangered Species Act, according to two scientists from the Alaska office of the federal Mineral Management Service that oversees drilling.

The environmental assessment was taken away from the agency’s unit that typically handles such reviews, and put in the hands of a different division that was more pro-drilling, said the scientists, who discussed the process because they remained opposed to how it was handled.

“The whole process for approving Liberty was bizarre,” one of the federal scientists said.

The scientists and other critics say they are worried about a replay of the disaster in the Gulf of Mexico because the Liberty project involves a method of drilling called extended reach that experts say is more prone to the types of gas kicks that triggered the explosion on the Deepwater Horizon.”

So the cast has now increased as the “slight of hand” continues and for all intent and purposes it appears that the right hand of the Federal Government “still” doesn’t know what the left hand is doing. Or does it?

© 2010 by Ira Schwartz. All rights reserved. Used with permission.

It's the Economy Stupid!

Frankly, I think the time has come to stop talking about BP, The Gulf Oil Spill or the Ecological disaster caused by it. Yes, it is the greatest man-made disaster in history. Yes, it will affect the beauty of the beaches in the Gulf. Yes, it will cause wildlife damage for decades. But: Enough! The Gulf is a problem. But, it is not the biggest problem facing our country at the moment. It will be cleaned up and the flow of oil will eventually stop.

The only thing about the Gulf that is good for the Obama Administration is that it is causing the rest of the country to forget the disaster that it is the US Economy right now. And, of course, the spin doctors in the White House are doing their best to keep the country and media off of the economy. Maybe that is why the Obama Administration wants everyone thinking that he messed up in the Gulf. As long as the Gulf Oil Spill is news, the economy is being ignored and Obama does not have to answer for his mess ups in that regard.

Yesterday, the Consumer Price Index was released for the month of May. It showed a .2 percent drop. The April number showed a .1 percent drop. That means we have now had two consecutive months of deflation which is surprising considering that the government is spending and printing fiat money likes it is going out of style. Deflation is one of the worst things that can happen to an economy. When prices go down, companies do not hire, people do not spend because of fear of job security, corporate profits go down and unemployment starts to go up. It can then become a spiral that gets out of control as it did in the 1930s during the Great Depression and Japan in 1990s.

This is further compounded when you look at the employment numbers for the past week and for the month of May. Last week initial jobless claims went up to 472,000. This was the third week in a row that the numbers were higher than expected. Continuing claims also rose to 4.57 million; which was also unexpected. The unemployed or underemployed continue to rise even though it is not shown in the official numbers because many are falling off of the unemployment roles.

Two weeks ago President Obama made a big deal about the unemployment rate dropping a percentage point. It is still 9.7% however which is higher than anybody expected and way above the 8% cap that the failed stimulus bill was supposed to hold it at. He also bragged about the roughly 450,000 new jobs that were created during the month. He bragged until everyone pointed out to him that 410,000 of them were temporary census workers and only 40,000 jobs had been created in the private sector.

Once that had been brought up, the bragging from the White House stopped. What did Obama do? He started talking about the Gulf. He didn’t talk about the Gulf for the six prior weeks except in passing. But, now he’s obsessed with it. Take the mind off of the real crisis that will cost him votes and spend time on something that he hopes can make him look good. But, of course, that is failing too. His speech on Tuesday night was an unmitigated disaster seen as such from both the left and the right.

The speech did have some effect though. It strong-armed BP into putting more than 20 billion dollars into the White House’s hands for the victims of the Gulf Oil disaster. That is right, I used the term “strong armed.” So did Texas Republican Congressman Joe Barton. He has been castigated by both parties because of it. I hope I am too. Barton is right. This tactic used by the White House is just another example of the Chicago thugs in action.

This matter should have been resolved in the courts by BP interpleading the money into the court system. BP has said from the beginning that it will pay for the damages caused by the spill. Now, BP has kowtowed to the White House and what will happen?

We will have another czar hired to divvy up the fund. He will hire another 50 or so people to administrate the fund. They will hire lawyers, accountants, etc., to evaluate the claims. And, who will pay for this new public entity? It will either come from the fund or from the taxpayers. If it comes from the fund, then BP has just created another bureaucracy of which none of the money will end up in the hands of people who need it. If it comes from the taxpayer, I say why? More big government, more public sector jobs: No help for the little man or the small businessman. Obama just does not care. He does not care about Main Street or the wreck that is the US Economy.

That seems to be the main mindset at the White House these days. He talks about caring and hope and change, but he doesn’t. He sits there all day listening to advisors and makes no decisions. However, he does play a lot of golf. President Bush played some and was castigated for it. The man sitting there now plays much more.

And, when he does make decisions they are not always in the best interests of the country. This morning, I read an Article on the Obama White Diaries: http://www.obamawhitehousediaries.com/. The Article talks about the President abandoning a portion of Arizona 80 miles away from the Mexican border because it is too violent. The Mexican drug cartels make it too dangerous for Americans to travel into the area. This is part of the United States. This is not Mexico we are talking about. It is not even a border town.

Instead of investigating the Arizona Immigration law, the Justice Department and its chief Eric Holder, should put the FBI and US Troops into this area and clean it up. Get the Mexican drug lords out and make it part of Arizona again. Of course, if Arizona does it themselves, it will be castigated even more by the Central Government.

A strong enforcement of the immigration laws is another way to help the economy. Get rid of the illegals and maybe the unemployment rate will drop a few points. Protect the border and more jobs will be created. However, this will just infuriate another Democratic voting block. And, we already know, that is the last thing the President wants or needs at this point based upon his recent poll numbers.

So, what does he do instead? He talks about kicking ass over the Gulf Oil Spill. After all, it makes people forget the real problem facing the country: “it’s the economy stupid!”

© 2010 by Frank T. DeMartini