Just as the subprime mortgage crisis had its roots in the Clinton Administration decision to require Fannie Mae and Freddie Mac to find enough low income borrowers so that half their loans were subprime, the Gulf oil spill also had its roots in misguided policies begun by the Clinton Administration.
In 1995, President Clinton signed the Outer Continental Shelf Deepwater Royalty Relief Act which exempted oil wells drilled deep in the Gulf from the normal royalty payments they would normally have owed the government for their oil. Usually, these payments amount to between 12% and 16% of their revenues, so exemption from this requirement did a great deal to catalyze drilling in deep waters in the Gulf of Mexico. As a result of the Administration action, deepwater oil production in the Gulf increased rapidly, growing from 42 million barrels annually in 1996 to 348 million in 2004. The latter figure represents about 6% of total United States oil consumption and about 15% of domestic production. Natural gas production from deepwater Gulf drilling increased tenfold during the same period.
The Deepwater Horizon well was one of those catalyzed by the Clinton legislation and began drilling in 2001.
The legislation was pushed avidly by Republicans in Congress, particularly those representing the very Gulf states now engulfed by the oil that is flowing from the wells they encouraged.
Unfortunately, the Clinton Administration – and the Bush and Obama Administrations that followed – failed to consider seriously what to do if things went wrong. In contrast to the licensing of nuclear power plants, where vast time and money has been spent developing fail safe systems, very little thought was given – obviously – to what how to stop an explosion that would trigger a vast spill, how to plug the hole, and how to stop the oil from reaching Gulf and Atlantic coast beaches.
Instead, the oil industry took its cue from Washington and went full speed ahead into drilling and production in deepwater Gulf oil wells with the predictable result that something, somehow, sometime would go very, very wrong and that nobody would have the faintest idea of what to do about it.
This decision to embark on vast Gulf oil drilling was, of course, the correct one. But the failure to think through how to avert a disaster on the magnitude of that which is now on our hands is the height of irresponsibility.
All three Administrations – Clinton, Bush, and Obama – bear the blame for this abject failure. None took the danger of a massive spill seriously or sought to hold up the massive expansion of off shore drilling until failsafe measures could be developed.
But, as with the subprime crisis, policy initiatives taken during the Clinton years – with the best of motives – were implemented without adequate regulation and without due consideration of the dangers involved. We are now suffering mightily for this failure of foresight and planning.