Due to Censorship at Huffington Post….

I had posted a response to Judy Dugan’s latest hysterics at Huffington Post, but it has been “pending moderation” for 4 days now. I suppose because I didn’t violate any of the rules that would cause it not to be posted, but I challenged Dugan’s competency, they figured they would just hold it until the story got stale. Huffington Post simply censored me the last time I tried to respond to one of Dugan’s screed (and so far they are doing it again). Below is exactly what I tried to post. It is milder than her initial story.

So, here is my response, followed by one from “armchair” over at Dugan’s Oil Watchdog site on the same story. You have to “unhide” the comments to see that one since they went to de facto censorship on all comments.

This post of Dugan’s is full of inconsistencies. Open up a blog post with a complaint that an editorial was partially based on a blog post. Then go right into an ad hominem by characterizing the source as “hard-right.” Nice journalism. Then, misrepresent the editorial ” “we must offer gratitude instead of criticizing” when in fact it implied no such thing. What it did attempt to do was set the record straight with people such as yourself who have no concept of economics ” and point out just how much the oil industry adds to federal coffers via taxes each year. The final irony was to suggest that Perry’s post was mean-spirited. And yours was…?

Furthermore, what is your deal with stock buybacks? If a CEO feels a company’s stock is undervalued, and the returns from buying back the stock are expected to be higher than additional capital investments (which are already in the multi-billion dollar per year range, as are oil company investments into alternative energy), then I expect that CEO to buy back stock. So what if it doesn’t increase dividends? Do you think investors are unhappy that dividends didn’t increase, when the stock value did because of the buybacks? Nonsense! Stock buybacks are a perfectly legitimate way of increasing the value of remaining shares ” if those shares are deemed to be undervalued.

Finally, don’t take this as a blanket defense of ExxonMobil. It isn’t. I can count on 1 hand the number of times I have bought their gasoline since the Exxon Valdez oil spill, and that’s only when I didn’t feel I could make it to another station. But someone needs to address this misinformation you persistently churn out. I get the feeling that if oil companies are funding schools for orphans, you will have something negative to say about that (just as you have over oil company investments into alternative energy).

Robert Rapier

And now “armchair”:

The $30 billion in taxes can also be viewed as about 7% of Exxon’s total revenue, $405 billion.

Discussing a tax rate in terms of revenue is a meaningless concept. But it sounds good to potential donors, and Dugan has just sent out emails soliciting donations.

Prof. Perry notes that over three years, Exxon’s annual taxes average $27 million.

Exxon paid $69 billion in taxes in 2006 alone. It’s in their annual report.

Here’s what Perry, much less the IBD editorial, forgets to mention about those taxpayers:

Here’s what Dugan fails to mention about Exxon:

– It employs about 106,000 people. It pays 50% of their social security taxes. It pays for their medical insurance.

– Those employees pay taxes on their Exxon salaries.

Additionally, the foundation for all of her criticism must be that Exxon is responsible for high oil prices. She has forgotten to provide even a shred of credible evidence for her claims. That a company with a 3% market share can control anything defies common sense.

– None of these low-income Americans’ taxes went to Kazakhstan, Chad, Nigeria or other corrupt nations with which Exxon does business.

I am in a state of confusion over this point Dugan keeps making. The countries she mentions produce about 5 million barrels of oil per day, and if we add the “others” (she’ll make the call) then there’s a lot more. Does she want to pull that oil from the market? A few months ago she severely criticized the US Secretary of Energy for putting a few tens of thousands of barrels in the US strategic reserve. I’m going to assume she wants that “corrupt oil” to remain on the market, and therefore is happy for those revenues to go to those governments. I guess Dugan feels her conscience is cleared by publicly placing the ethical burden on the middleman who brings that oil to her and other consumers.

But you’re part of the system, Judy Dugan, so such a position is not very clever. You benefit from those 5 million barrels, whether Exxon produces it or someone else does. Unfortunately, oil that you use is not always found in places you find convenient or politically correct. We as a society have to make choices and accept consequences. What is your choice? Produce the oil, or not? What are the consequences?

– None of these little taxpayers shared in the billions of federal government subsidies to oil companies that their taxes also helped fund.

Obviously Dugan does not understand the concept of the marginal investment and the nature of subsidies. It’s not worth explaining here.

Over the last three years, Exxon has spent an average of at least $25 billion a year on buying back its own stock instead of investing in growth or modernization. The buybacks are a corporate piggy-bank with little or no economic use except for keeping the stock price high. It doesn’t even boost dividends.

Do you think maybe it makes their stock look more attractive, and has the result of decreasing their cost of capital? Do you think they would buy back all of that stock if they had more profitable opportunities to invest the money in? This comment shows a very fundamental lack of understanding of the oil industry’s business environment, particularly the upstream business.

Exxon’s daily cash on hand in 2007 averaged $33 billion. Yet it continues to resist paying $2.5 billion in punitive damages to Alaskans permanently harmed by the negligent Exxon Valdez oil spill in 1989. Imagine what Exxon’s lawyers are being paid, year after year, on this case.

So you have aready decided they are guilty, even though the case is still ongoing. Why don’t you call the judge and save everyone some time and money? Exxon should just pay, because they have a lot of money. Good point.

And, just to compare to those $14,000-a-year folks, some of whom are probably Exxon employees, Exxon’s 2006 compensation to CEO Rex Tillerson included $13 million in direct payment, another $13.5 million in stock grants, and $480,000 in perks including $100,000 for “personal use” of the corporate jet. That doesn’t include his right to more than $20 million any time he decides to “retire.”

Oil industry CEO compensation is about the same on average as for US CEO’s across all industries. You can look it up. I’ve done so, but will spare you the graph. His salary probably pales next to lots of Hollywood types and athletes. But we’re all OK with that, aren’t we?

Dugan is starting to bore me at this point, though. There really isn’t any sport in this.

42 thoughts on “Due to Censorship at Huffington Post….”

  1. Robert – WTI closed above $100 today at $100.01. Likely a last second vanity trade as well. But you would have lost your bet today if you had continued.

  2. The Contra Costa Times picked up this Bloomberg story explaining the reasons for the buybacks:

    Oil Giants Spending Big on Buybacks”

    Chevron can’t spend as much as it would like on new wells because 81 percent of the world’s untapped oil reserves are in nations that limit or prohibit access to outside producers, Vice President Jay Pryor said.

    “A key barrier is access,” Pryor, who oversees corporate strategy for Chevron, said recently at a Houston energy conference hosted by Cambridge Energy Research Associates. “Barriers to these investments limit how much we can do.”

    Buybacks boose earnings per share by reducing the shares in circulation. In indirectly impacts dividends as companies now have fewer shares that require dividends. If the dividend yield on your stock is say, 4% a share buyback is like a risk-free 4% investment.

  3. If you want to slide one under their radar you have to “agree, except …” and then list the exceptions that blow everything out of the water.

    Generally anyone, even someone taking an emotional position, will name some truths. That’s your starting place …

  4. Compare RR’s post with these profound excerpts by esteemed Huffington commentator oldpotsmoker, that got through, no problemo:

    “Talk about the best government that money can buy. Exxon gets a deduction for oil exploration, deduction for oil production….”

    “These guys make more money off of not producing oil than they do even from producing it… “

    Gosh, they get to deduct expenses from their revenues! What a ripoff! Gives you a pretty good feel for the knowledge base of their editorial board.

    I agree with your final point 100% – the point is not really to defend Exxon. The point is that at the end of the day, oil companies are in general not too much different than companies in other industries, and like other companies are bound by the laws of supply and demand.

  5. RR:
    Don’t waste your breath on Dugan. Although, she has one point: Why doesn’t Exxon pay up on the spill? The tanker captain was drunk. He rocked the ship on a spit. Jeez, pay up and go on other, productive work.
    Oil again over $100. Frankly, I am baffled. They say OPEC plans cuts in production, as demand is falling. Could be. But that suggests lower prices, not higher…..
    I keep thinking declining demand will sink oil prices, but this is taking a long, long time……
    And if the House of Saud (financiers and teachers of terrorism) wants to cut production, then maybe prices can stay firm…..

  6. Benny – the XOM judgement had to do with punitive damages, not actual damages. The injured parties have been compensated. The 33,000 plaintiffs received about $15,000 each. The punitive damages would be 5 times that. Even if allowed by law they are unreasonable. XOM’s case is before the Supreme Court. They are arguing that XOM is not liable under maritime law.

    This isn’t about right or fair, or how much a company makes in how many hours but the rule of law.

  7. It just strikes me as corporate SOP, standard operating procedure. This is an adversarial system of law, and you keep lawyers on staff to fight every judgment against you.

    It sometimes seems wrong, or ugly, but it’s all supposed to work out in the end.

    “Even if allowed by law they are unreasonable.”

    Gosh do we all get to decide which laws are reasonable?

  8. is it worth our time and effort to write to the huffington post individually to criticize dugan? if she is going to perform such poor reporting, we should complain to her boss.

  9. Benny,

    I’m betting on a fall too, and thinking of making some bets on $70 oil this year. Between futures contracts and the risk of a recession in the US or any one of several large economies, I think a correction is coming.

    You’re right about Dugan though. I need to get a life and stay away from there myself. 🙂 But I would just love to read her posts after a $30 to $40 dollar drop in the price of oil. I think I know the angle: Big Oil trying to sabotage alternative energy development.

  10. Gosh do we all get to decide which laws are reasonable?

    First, the heart of the XOM’s argument is that under maritime law there are no punative damages.

    Also we have something in the law called “equal protection”. In theory XOM is entitled to the same justice as you or I. If you wrecked your car into the neighbor’s house and caused $15,000in damages would you think it reasonable for your neighbor to demanded $75,000 in additional “punishment”?

    Should the penalties be higher for those who can afford more? It the answer is yes, then let me reverse the argument. A corporate CEO and a cloistered monk commit the same criminal offense. The monk is much “richer” in terms of free time. So should the monk get 90 days in jail and the CEO only 1 day?

    Most people have no problem arguing fairness when it applies to XOM or some group they don’t like.

    I’m not excusing XOM or the captain. The accident was totally avoidable. However, XOM didn’t intentionally cause the spill, and they spent a lot to clean it up.

    The statue of justice has a blindfold not an accountant’s green eyeshade for figuring how much people should pay.

  11. Anon – if you’ve read this blog for any length of time there is something called EROEI or “Energy Returned on Energy Invested”.

    Pulling CO2 from the air to make fuel is technically feasible, and violates no laws of physics, however the EROEI is likely much less than 1. Meaning it requires more energy to run the process than it produces. That is why you need the nuclear reactor to make it work. The CO2 just becomes the energy carrier. You put energy into the process to convert CO2 to liquid fuel and then recover that energy when burning the liquid fuel.

    Besides, you would be better off recovering CO2 from a more concentrated stream like exhaust gas from a power plant, or better yet, the very concentrated CO2 from a coal gasification plant.

    It reminds me of the old Steve Martin joke: “How do you become a millionaire, first get a million dollars.”

  12. If it was clear cut, in the way you explain it King, we would not have had this history:

    “n 1994, in the case of Baker vs. Exxon, an Anchorage jury awarded $287 million for actual damages and $5 billion for punitive damages. The punitive damages amount was equal to a single year’s profit by Exxon at that time.

    Exxon appealed the ruling and the 9th U.S. Circuit Court of Appeals ordered the original judge, Russel Holland, to reduce the punitive damages. On December 6, 2002, the judge announced that he had reduced the damages to $4 billion, which he concluded was justified by the facts of the case and was not grossly excessive.

    Exxon appealed again, sending the case back to court to be considered in regard to a recent Supreme Court ruling in a similar case, which caused Judge Holland to increase the punitive damages to $4.5 billion, plus interest.

    After more appeals, and oral arguments heard by the 9th Circuit Appellate Court on 27 January, 2006, the damages award was cut to $2.5 billion on 22 December, 2006.[21] The court cited recent U.S. Supreme Court rulings relative to limits on punitive damages.”

    Sadly, that looks to me like Exxon using it’s deep pockets to fund a long-term adversarial campaign, in the face of negative judgments, by law.

  13. Sadly, that looks to me like Exxon using it’s deep pockets to fund a long-term adversarial campaign, in the face of negative judgments, by law.

    Yes, because the cost to keep filing lawsuits for ExxonMobil is miniscule compared to the final settlement. If the original punitive judgement had been a more reasonable number XOM would have been better off to pay and be done with it.

    Besides, if the purpose of the punitive damages was to change XOM and the industries behavior then one could argue that it has worked without the punitive awards. How many oil spills have there been since? The spill led to OPA90 and double hulling of all the Alaskan crude fleet. The industry has implemented a number of risk mitigation plans. There is a lot of data that shows that shipping crude worldwide has become much safer (hull penetrations of 1 meter or more are down 90%). The results aren’t perfect yet, but things are improving.

  14. What I see that is wrong in corporation liability is how the shareholders are insulated from responsibility for the mistakes of its executives. If all the shareholders of record were sent a bill based on how many shares they have then the customers won’t be stuck with paying the bill through a price increase. A corporation that is repeatedly sued for the harm they do would see its stock price plummet until it becomes a good citizen of the places it does business in. Corporate policies often kill people and ought to face the death penalty when the choices they make in the board rooms devalue the worth of persons.

  15. Armchair and kingofkaty-

    Actually, i don’t know anything about the Exxon Valdez event and follow-ons. Strike my comments.
    On oil, be careful. I lost my pants last year shorting oil.
    Yes, it has to go down. No, it does not have to go down on schedule.

  16. If all the shareholders of record were sent a bill

    They are. It is called “earnings per share”. If that number goes down it can impact the dividend and stock price. The stock price of a company is a representation of the net present value of its income stream. The shareholders of Exxon lost something like 10% of the stock value after the Valdez.

  17. You are arguing a parallel universe story, King.

    You are saying that without those same “unfair” judgments hanging over their heads they would have done the same thing.

    I can’t argue that, because of course, no on really knows.

  18. benny,

    i think it is very perilous to long or short futures. too much downside recession risks associated w/ going long on oil. too much everything else risk associated w/ shorting oil if you are gambling on a recession.

    i like to just gamble on 1 sure thing – oil prices will be sky high in like 2016. but you have to have the patience and stomach some crazy volatility.

    but i agree, there’s a ton of downside risks right now w/ oil.

  19. Odo – the other North Slope operators also tightened up their operations and put new ships in service. Partly due to OPA90 and partly because nobody wanted to have the public relations disaster that Exxon had.

    So what is the purpose of the punitive damages? Is it revenge? (Remember we’ve dealt with compensation.) Originally it was argued the $5 billion was to get Exxon’s attention and to force them to change. Well it appears that they have.

    If our justice system is in the revenge business then that is a pretty sad statement on our culture.

  20. You don’t see what I mean by parallel histories?

    All that happened as people say the punitive damages building, and as they saw it ruled, and as they saw it (at least for a while) upheld by appeal courts.

    If you say we would have gotten the same actions in a parallel universe, without the judgment, what can I say?

    We’ll never know.

  21. If our justice system is in the revenge business then that is a pretty sad statement on our culture.

    It’s worse than that, King. A large part of our “justice” system has become legalized extortion from those who actually provide goods & services, with much of the benefits flowing to a rather small group of super-rich lawyers.

    To their eternal shame, Democrats have allowed their Party to become dominated by those rich ambulance chasers, who need ever more complicated & vague laws to provide new grounds for suing anyone actually doing anything.

    In a globalized economy, the expected results are occuring. Industry & business are fleeing the hostile environment the lawyers (& their tame politicians) have created. Scratch the surface, and you will find that regulatory burdens, litigation & resulting economic uncertainty have had as much to do with outsourcing as low wages in China.

    The US could afford that kind of high overhead when energy was cheap & plentiful. Peak oil is going to be very hard on that kind of lawyer.

  22. benny,

    The haggle has been over the amount of financial punishment. Hazelwood’s inibreation got the headlines, but was unlikely to be the proximate cause. On the other hand, the company put a known alcholic, found to have a stash in his cabin, in charge of all that crude. The ship manovered around floating ice and failed to move back onto the required corse line in a timely manner. The third mate, standing the bridge watch, or the able seaman at the wheel didn’t know how to run the autopilot, if memory serves. In any case, there was gross incompatence in hitting a well charted obstical with 1.26 million barels of crude on board.

    Besides the original argument, that the damages (a year’s profit) are excessive, Exxon has invoked an interesting Supreme Court precident from the early 1800’s which absolves owners from damages caused by the recklessness of a crew. It’s based on the actions of a privateer’s boarding of a netural Hatian scooner in November of 1814, during the war of 1812. Arguments before SCOTUS are 6 days away.

    The company is earning $400 million a year in interest on the money reserved in case it’s ultimately compelled to pay up, and Wikipedia claims that “someone from within Exxon Mobil had altered the descriptions of the oil spill”.

    The ship is prohibited by law from returning to Prince William Sound. Exxon is not well thought of within Alaska, for the spill and many other reasons.


    You make the point for punishment in citing improvements in tanker safety. What kind of alteration to the green eyeshade calculations made around the big rosewood tables do you think a couple of billion $ judgment made? The idea is the same one as the one that applies to you or I in criminal law — don’t do things because we’ll be punished if we do. This was a case of very gross neglegence, not an act of god.

  23. What kind of alteration to the green eyeshade calculations made around the big rosewood tables do you think a couple of billion $ judgment made?

    To answer your question, none. It will be interesting to see the arguments that ExxonMobil makes before the SCOTUS. ExxonMobil had the judgement hanging over them whether or not they made changes. The industry responded to the bad publicity. The cost and distraction of the cleanup itself was enough to change their behavior. It isn’t as if ExxonMobil just paid for the cleanup, paid their fine and then had even more spills.

    I think this goes back to greed and revenge. Dugan takes a cheap swipe at XOM without including all the facts, because she is trying to whip up hate for big companies. It is populism.

  24. Interesting debate, but a juvenile introduction. Pointing out “censorship” on other peoples’ blogs is like a teenager fingering a “hypocrite.”

    Far be it from me to tell you what not to post, but stick to your acute policy notes, my man. It’s a waste of effort to throw petty labels at detractors, and it nearly put me off the whole post.

  25. John, I have to respectfully disagree. The Huffington Post is more than simply a personal blog. It claims to be all about free speech, democracy, apple pie – and is run by Ariana Huffington. Celebrities often post political views. So, I think pointing out censorship is valid. Or don’t you think it was censorship?

  26. “My name,” I tried two posts. You can see the one that went through over there. Here is the one that didn’t:

    “As trivia, oldpotsmuggler, America actually invented just this sort of price fixing.
    For years the Texas Railroad Commission was tasked with providing price stability …

    “… from its founding in 1891 to a multi-divisional regulatory commission that oversaw
    not only railroads but also a number of other industries central to the modern American
    economy: petroleum production, natural gas utilities, and motor carriers.”

    More here. It’s a surprising history to someone (me too) who grew up in the OPEC age.”

    It had a link on the “more here” and I didn’t know that they don’t do a-links … but other than that what’s to worry about?

    I think it is a faulty system (perhaps man/machine) at a minimum. It’s left to guess if it is both faulty and censoring.

  27. BTW, isn’t there an argument that “withholding a venue” is not censorship in this day an age?

    I think rules are in flux for our post-internet society, but one reason (other than maintenance and stalkers) that I don’t even have comments on my blog is that anybody can “answer” buy starting a free blog and writing a response.

    Anyone who does that controls their own venue, as Robert does here.

    (I think it is an interesting age as these rules and conventions sort themselves out. It’s amusing to compare them to past ages. For instance, Ben Franklin was into sock puppets. I’ve never done that.)

  28. It’s a waste of effort to throw petty labels at detractors, and it nearly put me off the whole post.

    This reminds me of a conversation I once heard. Someone was talking about “Mexicans”, and someone piped in “That’s racist.” The other person said “What do you mean, that’s racist? What do you call people from Mexico?” Answer: “Hispanic Americans.”

    So, as an Anglo/Euro/Native American, I don’t consider “Censorship” a petty label. I have engaged in censorship here when it was warranted because the person doing the posting was engaging in personal attacks. That was censorship. It’s not petty to call it that.

    When Huffington Post doesn’t post comments critical of an essay, but otherwise in keeping with the posting rules, that is censorship. It may be as Odograph says, and just a technical glitch. But it has happened to me several times, each of which was a critical response to something someone wrote.

    And I disagree with Odo’s “anyone can start a blog and answer” argument. If the argument is made in the Washington Post, and answered in the Paducah Gazette, it isn’t the same.


    P.S. Odo, I don’t use sock puppets. I used a pseudonym for a long time, but no more. Google “Fedmahn Kassad” and evolution for what I did in my previous life.

  29. I wasn’t implying you did Robert, I just happened to look up the Ben Franklin thing and was surprised that, by current standards, he did.

    Pretty weird.

  30. “And I disagree with Odo’s “anyone can start a blog and answer” argument. If the argument is made in the Washington Post, and answered in the Paducah Gazette, it isn’t the same.”

    Actually “letters to the editor” is one pattern I was thinking of. We don’t consider it censorship that a newspaper does not print every single letter it receives. It’s a bit different in the web sphere, certainly, when “space” is assumed to be “free.”

    In the case of web sites people generally print a policy and the can be judged against it. Some people say they’ll delete anything they don’t like. Some will try to make it more balanced-seeming.

    FWIW, I did surf to HP’s rules. Both of my test posts seem ok by that standard, so I’m thinking they have a flaky system.

    But of course it is bound to be a bit arbitrary. In their last rule the make the classic assumption that we “imply” what they “infer:”

    They will delete posts which “are posted with the explicit intention of provoking other commenters or the staff at Huffington Post.”

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