Speculation is mounting that BP may go bankrupt paying costs associated with the Gulf oil disaster. Pre-spill, BP had net assets of $105 billion and annual cash flow of up to $40 billion per year, excluding dividends and capital expenditures. Goldman Sachs estimates that BP will spend about $40,000 per barrel for cleanup, containment, litigation and related costs. If estimates hold, BP’s present liability already has reached as much as $56 billion. Another $50 billion in liability is not unrealistic, and a few analysts are giving a high estimate of as much as $398 billion.
It is imperative that policy-oriented organizations and politicians that received contributions from BP or its affiliated foundation in recent years immediately return the donations they received or contribute them to a reputable, independent Gulf cleanup fund. Returning BP’s money to assist cleanup efforts and help those harmed by the leak would respect both the moral imperative and the environmental imperative.
It is well-established that when politicians and others find themselves in receipt of donations of dubious or inappropriate origin, they send them back. Donations were returned to Goldman Sachs after that firm was charged with civil fraud. Numerous Florida politicians returned donations from a law firm charged with operating a Ponzi scheme. President Obama returned donations from his aunt, an illegal alien, and from a man charged with murder. Many donations were returned to Enron Corp.
Columnist Alex Brummer of Britain’s Daily Mail notes, “BP faces potential destruction … the stock market value of BP has plunged by 55 billion pounds [$80 billion] … [the situation risks] ruining the best chance of cleaning up the mess and providing sufficient compensation to the victims of the catastrophe.”
As many of the policy organizations receiving BP donations have been environmental groups, the moral and environmental imperatives of returning the gifts is obvious. According to published reports, major environmental advocacy organizations that accepted major gifts from BP in recent years include the Nature Conservancy, the World Wildlife Fund, the World Resources Institute, various branches of the Audubon Society, the Wildlife Habitat Council and others. Many politicians from both political parties who also took contributions have in recent weeks been harsh critics of BP. It would be inappropriate, on the one hand, to criticize BP for taking what appear to have been shortcuts with safety and environmental needs while, at the same time, profiting from BP’s business model.
BP also was a founding member of the U.S. Climate Action Partnership, contributing substantial funding to the climate-change-related lobbying efforts of the environmental groups within it, which include the Environmental Defense Fund, Natural Resources Defense Council, the Nature Conservancy and the World Resources Institute.
Returning the BP grants would not force these environmental organizations to close their doors. The Nature Conservancy, a BP grantee, reported nearly $1.4 billion in revenue in 2007-08, against about $900 million in expenses, with net assets of nearly $5 billion. Although only BP and the Nature Conservancy know for sure, published reports say the Nature Conservancy has received about $10 million from BP - enough to make a big difference in the cleanup effort but a relatively small amount to the Nature Conservancy.
The World Wildlife Fund, another BP grantee, raised $10 million more in fiscal 2008 than it spent and had nearly $300 million in net assets. Researchers at the National Center for Public Policy Research have found evidence of grants totaling slightly less than $1 million in BP donations to this institution. Yet another group, the World Resources Institute, had more than $50 million in net assets and reportedly received at least $200,000 from BP.
The Natural Resources Defense Council had $107 million in revenue in fiscal 2008 against expenses of $78 million, with net assets of $186 million. The Environmental Defense Fund had revenue of $122 million in fiscal 2008 against expenses of $97 million, with net assets of $25 million. These environmental organizations are to the nonprofit community what the Fortune 100 is to the business community.
Even one of the little-known environmental organizations to receive BP largesse, the Wildlife Habitat Council, reported revenue of $2.9 million for fiscal 2009, with the publicly reported BP monies it received totaling far less than its net assets.
If BP survives the current crisis, it will struggle for years with reputational difficulties that will harm its bottom line. It would be ironic if a refusal to return or redirect BP contributions to a Gulf cleanup fund were similarly to harm the reputations of some of America’s wealthiest environmental organizations.
Amy and David Ridenour are the president and vice president of the National Center for Public Policy Research, a conservative, free-market think-tank in Washington.
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