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Oil, law, and lawlesness

Law Library
|Written By Damian J. Penny
Oil, law, and lawlesness
The Secret World of Oil, by Ken Silverstein, Verso Books, 2014, pp. 240.

The good Lord didn’t see fit to put oil and gas only where there are democratic regimes friendly to the United States.

— Dick Cheney

You might not be a fan of the last vice president of the United States, but the experienced oilman was on to something when he made this observation. There is actually a lot of oil under (or in the sea next to) wealthy Western democracies, but much of the black stuff just happens to be located in some of the world’s poorest, most corrupt, and lawless nations.

If anything, these countries are corrupt and lawless because of the oil in their ground. The revenues are used as a personal piggy bank for dictators and their cronies, while very little of that wealth is used for good schools, hospitals, or infrastructure. Meanwhile, armies of lobbyists, consultants, brokers, and former politicians have spread out around the world, helping smooth things out between those who control the oil and the energy companies who want to drill for it.

Everyone knows about Exxon Mobil Corp. or Suncor Energy Inc., but few will have heard of, say, Glencore Xstrata, one of the wealthiest and most secretive enterprises in the world. The Secret World of Oil, by journalist Ken Silverstein, will surprise and intrigue readers with its vivid portrayals of these powerful, little-known players — but the book also, perhaps inadvertently, illustrates the importance of the rule of law.

In Louisiana, for example, the oil and gas industry has a lot of clout, and they’ve been very effective at ensuring Democratic and Republican legislators make sure laws governing the industry aren’t too strict. But that’s not the whole story: as illustrated in The Secret World of Oil, creative and determined lawyers have developed innovative and surprisingly effective strategies to help people who’ve been wronged by these powerful, politically connected energy interests.

Dubbed “legacy lawsuits” by the industry, landowners in the state have sought redress against oil and gas companies for serious environmental damage caused to their property. In 2003’s Corbello v. Shell decision, the Louisiana Supreme Court upheld a $33-million judgment against the Anglo-Dutch giant, which had negligently stored salt water in unlined pits on William Corbello’s property.

Critically, the court held punitive damages against corporate polluters could exceed the fair market value of the property. (“They’ve never learned the lesson taught to the rest of us by our mothers, which is you do the right thing and clean up your own mess,” says trial lawyer Gladstone Jones III.)

The energy companies have fought back against legacy lawsuits, with some success, lobbying for legislation that would limit damages awarded in such cases. Still, even though the players in the game may not be evenly matched, at least there are clearly defined rules and effective ways for the underdog to fight back.

In oil-producing nations like Equitorial Guinea, by contrast, there really are no rules except for the ones the ruling family make up on the fly. Run by the tyrannical Teodoro Obaing since 1979, this tiny African country is one of the wealthiest nations, per capita, on the continent. Unfortunately, most residents haven’t benefited at all — indeed, according to some social indicators, things have gotten worse for the average citizen since the oil started flowing.

Obaing and his inner circle have done pretty well for themselves, though. So has Nursultan Äbishuly Nazarbayev of Kazakhstan, who has used the services of none other than Tony Blair to promote his country’s booming energy sector. So have the Communist rulers of Cambodia, who are quickly opening their country to energy exploration and making a fortune.

The major oil companies understandably don’t talk about this much, but The Secret World of Oil quotes several executives who admit to dealing with shady characters, but explain there is simply no other way to do business in much of the world. The result is a vicious cycle of corruption, which becomes more and more pervasive and destructive.

Informative, entertaining, and refreshingly non-preachy, The Secret World of Oil will change the way you look at the industry, and the legal systems which govern them. Or, in many nations, don’t govern them.


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