Third World America - Arianna Huffington [51]
Regulations are “very difficult to comply with,” and “so many of the laws” are “nonsensical,” in the words of Don Blankenship, the chief executive officer of Massey Energy, the company that owns the Upper Big Branch mine, which just happens to have a shocking history of safety violations.32
The Wall Street Journal cites the arguments of oil industry executives and regulators who claim “that offshore operations have become so complicated that regulators ultimately must rely on the oil companies and drilling contractors to proceed safely.”33 “There has been a very good record in deep water [drilling],” said Lars Herbst, head of the MMS’s Gulf of Mexico region, “up until the point of [the Deepwater Horizon] accident.”34 Other than that, Mrs. Lincoln, how did you enjoy the play?
Similarly, the reason the financial industry can’t be regulated adequately is because, as Alan Greenspan put it during his 2010 testimony before the Financial Crisis Inquiry Commission, “the complexity is awesome,” and regulators “are reaching far beyond [their] capacities.”35
That is, of course, exactly the way Wall Street designed it. To the financial world, “awesome complexity” is a feature, not a bug.
The mining and oil-drilling stories are remarkably similar to what happened in the financial industry over the past decade. A disaster occurs. Politicians are “outraged” and demand reform. Laws are passed. And then, when the next disaster occurs that the new laws were supposed to protect against, we find out about the loopholes in the last set of “reforms.”
Massey offers a textbook—and tragic—example of how this works. After the 2006 Sago mine disaster killed twelve miners in West Virginia, mining regulations were enacted that called for a company with a “pattern of violations” to be subject to a much greater level of scrutiny.36
If you’re looking for the poster child for the phrase “pattern of violations,” it’s Massey Energy. In 2009, its Upper Big Branch mine was ordered to be temporarily closed more than sixty times.37 That same year, the mine was cited for 515 violations.38 In 2010, by the time of the explosion, it had already received another 124 violations.39 What’s more, in the ten years before the Upper Big Branch explosion, twenty people had been killed at mines run by Massey.40
So how did Massey escape greater oversight following its pattern of violations? It turns out that a loophole written into the law says that if a company contests a violation, it can’t count toward the establishment of a pattern while the matter is being contested.41 At the time of the explosion, Massey was contesting 352 violations at the Upper Big Branch mine alone.42
According to another loophole in the law, a company can delay paying a fine while it contests the violation.43 The result? Only $8 million of $113 million in penalties levied against mining companies since April 2007 had been paid by April 2010—around 7 percent. To people like Don Blankenship—or any big bank CEO, for that matter—that kind of money is seen simply as the cost of doing business; it’s factored into the bottom line, like bribes are in the Third World.44
The BP disaster has a similar story line.45 Between 2001 and 2007, U.S. offshore drilling accidents resulted in 41 deaths and 302 injuries. Over the last decade, the Minerals Management Service expressed concerns about the safety of offshore oil rigs and warned oil companies about the need to have backup safety equipment of the kind that could have prevented the Gulf spill. But, in the face of aggressive lobbying from the oil industry, the agency backed away from its concerns, crossed its fingers, and hoped that the industry would voluntarily police itself.46
The piece of equipment that the industry resisted because it was too costly, known as an acoustic trigger, runs about $500,000.47 The replacement value of the