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Buzz
06-08-2010, 08:57 AM
I saw this article at Economist.com and it got me thinking about the idea that Franco had about regulation of oil drillers. The position of Republicans on this issue surprised me a bit. And it makes me wonder, what is a "mom & pop" oil drilling outfit, and do any exist in the market today?

http://www.economist.com/blogs/democracyinamerica/2010/05/energy_disasters_0


Mom-and-pop catastrophe shops
May 20th 2010, 14:45 by M.S.

SPEAKING of not subsidising any particular energy industry over any other: let's say you had a little mom-and-pop nuclear-reactor company. Or, better yet, a small but very dynamic, very aggressive start-up nuclear-reactor company with some great ideas about how to run a reactor at half the cost of those big inefficient old utility companies. The competition will be great for the business, driving down prices everywhere. But wouldn't you know it, you just can't get your company off the ground. Why? Because the federal government requires you to insure yourself for $10 billion in damages in case of an accident. (For anything above $10 billion, the taxpayer picks up the tab.) Just because of the tiny chance that your reactor might melt down and turn the tri-state area into a radioactive wasteland, you'd have to pay $400,000 a year in premiums on your reactor. At that price, only the big guys, the monopolies, the Florida Power and Lights of the world can operate nuclear reactors. There's no room here for the little guy. Terrible, huh?

This brings us to offshore drilling. As we're all by now aware, the liability limit on offshore oil spills isn't $10 billion. It's $75m. Anything above that, and the taxpayer picks up the tab. There's a bill afoot in the Senate to raise the liability limit to $10 billion, but Republicans have blocked it twice, arguing that liability limits that high will push little mom-and-pop offshore drilling platforms and supertanker operations out of the business and reduce competition. And now it turns out that the Obama administration, though it criticises Republicans for blocking the bill, agrees that the $10 billion limit is too high.

Of all the priorities the American taxpayer has at the moment, is putting tens of billions of public dollars on the line to subsidise competition by small operators in the offshore-drilling business really on the list? What is the justification for subsidising insurance for offshore drilling, with its record of repeated spills, more heavily than we subsidise nuclear power, which has an excellent safety record? What is the justification for subsidising either of them more heavily than industries like wind and solar power, which pose no catastrophic risks? Here's an issue Rand Paul might like to take up. Over at the libertarian Cato Institute, Navin Nayak and Jerry Taylor think there should be no limits on liability for the nuclear-power industry at all. They call it "corporate welfare". I'm curious how they feel about similar implicit government subsidies for offshore drilling.

charly_t
06-08-2010, 10:10 AM
And it makes me wonder, what is a "mom & pop" oil drilling outfit, and do any exist in the market today?


Yes, they do exist.....except a family member helps run the operation now. I can't explain it though. Just don't do business with them and expect to keep your shirt :-)

Franco
06-08-2010, 10:38 AM
Mom & Pops do not exist in offshore drilling. They do thrive on land drilling and overwhelmingly drilling for natural gas.

Can we trust the Feds to to the job of regulating by bureacrats?

I don't think so. They've failed at everything from offshore to Wall Street.

Regulation should be in the hands of private business with some oversight by the Feds.

If insurance companies stood to loose hundreds of millions or even billions, you bet that they would inspect every little detail and aspect of drilling. Whereas, a bureacrat would only lose thier job.

Make it mandatory in offshore drilling for the companies to maintain a 3 billion policy per well drilled with a 1 billion deductable!

depittydawg
06-08-2010, 11:03 AM
Mom & Pops do not exist in offshore drilling. They do thrive on land drilling and overwhelmingly drilling for natural gas.

Can we trust the Feds to to the job of regulating by bureacrats?

I don't think so. They've failed at everything from offshore to Wall Street.

Regulation should be in the hands of private business with some oversight by the Feds.

If insurance companies stood to loose hundreds of millions or even billions, you bet that they would inspect every little detail and aspect of drilling. Whereas, a bureacrat would only lose thier job.

Make it mandatory in offshore drilling for the companies to maintain a 3 billion policy per well drilled with a 1 billion deductable!

Franco. The feds regulated industry quite effectively for about 40 years. Those federal bureaucrats, you know the unbending bookworms you used to pick on in school, yeah, those guys, were good at their jobs. That is, before Reagan began the still escalating trend to de-fang them.
Regulation stopped working when the regulatory agencies became revolving doors for industry insiders. TheThe most recent trend, self regulation kicked in in about the last 10 -15 years. In practice it has been a complete failure. It has led us to meltdowns in every industry that it has been employed that I'm aware of. Health, energy, financial industries are the current mess that are dragging this nation under. They were all deregulated during the Clinton Presidency.

aandw
06-08-2010, 12:13 PM
all the regulation we have now is a contributing factor to jobs going over seas. there has to be oversight, but the gov't has made the US an unfriendly place to do business.

Franco
06-08-2010, 07:49 PM
Franco. The feds regulated industry quite effectively for about 40 years. Those federal bureaucrats, you know the unbending bookworms you used to pick on in school, yeah, those guys, were good at their jobs. That is, before Reagan began the still escalating trend to de-fang them.
Regulation stopped working when the regulatory agencies became revolving doors for industry insiders. TheThe most recent trend, self regulation kicked in in about the last 10 -15 years. In practice it has been a complete failure. It has led us to meltdowns in every industry that it has been employed that I'm aware of. Health, energy, financial industries are the current mess that are dragging this nation under. They were all deregulated during the Clinton Presidency.

I have no faith in bureaucrats getting anything right. Besides, getting rid of them is one good way of shrinking the Fed gooberment! I'd trust private buisness to get it done and not some Fed flunky.

YardleyLabs
06-08-2010, 08:31 PM
I have no faith in bureaucrats getting anything right. Besides, getting rid of them is one good way of shrinking the Fed gooberment! I'd trust private buisness to get it done and not some Fed flunky.
I trust businesses to do what is in their financial interest with a level of competence that depends directly on how competitive a market they play in. The purpose of government is to help make sure that it is NOT in the interest of businesses to mess up the world we live in. In the absence of competition and regulation, most businesses that I have worked with (and that includes some of the largest and most prestigious in existence) would happily sell all of our children into slavery if it made profit sense. Most businesses operating with monopolies that prevent effective competition are so in-bred, bureaucratized, and corrupt that governments look like a model of efficiency. When I left government, my first and most profitable clients were oil companies and insurance companies because they were completely inept by government and commercial standards.

Franco
06-08-2010, 08:51 PM
I trust businesses to do what is in their financial interest with a level of competence that depends directly on how competitive a market they play in. The purpose of government is to help make sure that it is NOT in the interest of businesses to mess up the world we live in. In the absence of competition and regulation, most businesses that I have worked with (and that includes some of the largest and most prestigious in existence) would happily sell all of our children into slavery if it made profit sense. Most businesses operating with monopolies that prevent effective competition are so in-bred, bureaucratized, and corrupt that governments look like a model of efficiency. When I left government, my first and most profitable clients were oil companies and insurance companies because they were completely inept by government and commercial standards.

I guess you didn't read my first post of this thread.

Insurance companies are all about making money and they hate to pay claims. That is why they as a private buisness are much better suited to enforce regulations than some governemnt flunky that only stands to lose his job when he makes a mistake. The insurance company would stand to lose hundreds of millions if they make a mistake.

depittydawg
06-08-2010, 08:54 PM
I have no faith in bureaucrats getting anything right. Besides, getting rid of them is one good way of shrinking the Fed gooberment! I'd trust private buisness to get it done and not some Fed flunky.

And by what evidence do you base that trust? At some point you have to test an ideology. And the self regulating ideology has been a failure. Even Allan Greenspan admitted this.

Buzz
06-08-2010, 08:59 PM
I have no faith in bureaucrats getting anything right. Besides, getting rid of them is one good way of shrinking the Fed gooberment! I'd trust private buisness to get it done and not some Fed flunky.



I guess you didn't read my first post of this thread.

Insurance companies are all about making money and they hate to pay claims. That is why they as a private buisness are much better suited to enforce regulations than some governemnt flunky that only stands to lose his job when he makes a mistake. The insurance company would stand to lose hundreds of millions if they make a mistake.

What they would be good at is denying claims to the victims of disasters caused by their clients.

Franco
06-08-2010, 09:15 PM
Guys, I know you reading comprehension has to be better!

I'm talking about a 3 billion policy with a 1 billion deductable and let the insurance companies oversee the regulation and the safety of the drilling operation.

If the drilling company screws up, the insurance company has to pay after the deductable!!! The oil company pays the first billion.

Do you want some saleried Fed flunky that is capable of being wined and dined by big oil as a watchdog or a private business that has thier interest in not having to pay so they make damn sure everything is is line with the regulations?

Franco
06-08-2010, 09:25 PM
The Fed government has proven over and over that they are inept! The Feds are never the answer to any problem. The damn mess we are in now is due to the Fed government. Wall St, Health Care, Foreign Policy...on and on. The answer is in the private sector with a financial interest to get the job done right.

YardleyLabs
06-08-2010, 09:28 PM
I guess you didn't read my first post of this thread.

Insurance companies are all about making money and they hate to pay claims. That is why they as a private buisness are much better suited to enforce regulations than some governemnt flunky that only stands to lose his job when he makes a mistake. The insurance company would stand to lose hundreds of millions if they make a mistake.
I have to agree with Buzz on this one. The P&C departments I have worked with at insurance companies are not particularly good at or interested in risk management. They rely on high premiums, and stingy claim processing. AIG is example they would all like to follow pocket the bonuses, find a new job.

Franco
06-08-2010, 09:31 PM
I have to agree with Buzz on this one. The P&C departments I have worked with at insurance companies are not particularly good at or interested in risk management. They rely on high premiums, and stingy claim processing. AIG is example they would all like to follow pocket the bonuses, find a new job.

I know all to well how insurance companies don't like settling claims. It took some Katrina victims over two years to get thier money.

But, when the Fed Governemnt is the policy holder, different ballgame!

Do you think an insurance inspector would allow for a faulty BOP to be installed?

YardleyLabs
06-08-2010, 10:05 PM
I know all to well how insurance companies don't like settling claims. It took some Katrina victims over two years to get thier money.

But, when the Fed Governemnt is the policy holder, different ballgame!

Do you think an insurance inspector would allow for a faulty BOP to be installed?
Absolutely. He wouldn't know the difference. The basic insurance rule is don't insure at all if the risk is too great. Until the risk is proven to be great by a major accident, go ahead and write the premiums, pocket the bonuses, and hope you're somewhere else if it all hits the fan. My cynicism is born from too much experience, although not specifically relating to drilling insurance. Insurance companies are just like everyone else. They overvalue risks that are near term and routine, and undervalue risks that are uncommon. Turnover in the industry -- at least in terms of specific assignments -- is generally fast enough that the person who wrote the policy that went sour will seldom be around to be held accountable when it goes belly up. The emphasis is on short term profits -- and bonuses -- and the higher up you are, the faster you will be moved to another position before the chickens come home to roost. A friend of mone was named employee of the year and given a massive bonus one year. Her entire department was eliminated the next because of a few major claims. She had already been promoted to another area. The claims all came from an agency that she had tried to cut off for bad underwriting, but she was overruled because of the volume of business they sold.