The Oil and the Glory

Is it unfair to tar all oil drillers with the same brush?

Is it unfair to tar all oil drillers with the same brush?

A year after the Gulf of Mexico oil spill, there is a stampede to get on with it. Oil majors and independents, the governors of Louisiana and Mississippi, among others gripe about the Obama administration’s pace of permitting drilling to return to the Gulf. The dozen companies whose deep-water operations have been suspended note that a joint spill response mechanism — a gigantic piece of equipment called a Containment Response System, plus teams to operate it — has been put in place, as Sheily McNulty describes today in the Financial Times. Meanwhile, they say they should not all be tarred with the same brush — BP was slipshod, they argue, but everyone else observes ultra-safe practices. For the governors, the assertion is that it’s time to put thousands of people relying on the industry back to work at a tough economic juncture. All argue that the administration is turning an environmental accident to unjustifiable political and ideological advantage.

But is the industry truly ready to go back to work? A couple of points make one uncertain. For starters, assurances that BP was the only bad actor aren’t good enough, and verge on the naïve — all actors in the Gulf knew or should have known that any accident by anyone would affect all.

What about the spill containment equipment? As described, this is an impressive bit of work. Yet it also has a distinct political quality — in order to get working again in the United States, the industry was forced to take such action; otherwise no one would be convinced it is serious about the environment. But we see no word of such equipment being deployed elsewhere in the deepwater world, such as in Angola, Brazil, Canada, Nigeria and Norway. Are we to believe that the Gulf of Mexico is the only place at risk of a big spill? For more on the future of the Gulf, read on to the jump.

And what about the equipment that is already deployed around the world — blowout preventers? Three weeks ago, we had an Interior Department report by Det Norske Veritas that this last-stand technology — a piece of equipment that the industry has trotted out for years as the fail-safe reason no one should fret over drilling anywhere in the world — in fact does not work under severe stress. At Macondo, Det Norske said, the blowout bent the well pipe, and pushed it out of position. So when the sheers were activated, they couldn’t close entirely. Most of the oil flowed through a resulting 1.4-inch opening. It turns out that the just-below-the-radar industry secret is that blowout preventers are largely for show — it is widely understood that the apparatus may or may not work in a pinch.

Is the industry suggesting that it should go back to work without a reliable blowout preventer? Interestingly, the answer is yes. Gary Luquette, Chevron’s president for North America exploration and production, has said he hopes the report on the Macondo blowout preventer doesn’t halt the permitting process. He says "the best way to deal with a blowout is never to have one." Well, that’s certainly true. ExxonMobil CEO Rex Tillerson suggests that Macondo was a mere black swan event, by which he suggests let’s get back to work. But he seems also to get the definition a bit turned around — if we’ve learned anything in recent years, it’s that black swan means a high impact occurrence that, though highly unexpected and improbable, can and does happen with devastating impact.

After all the claims that have been made about this piece of equipment, any retreat is going to require some artful footwork. But one wonders why, instead of asserting now that it’s not needed, the better approach wouldn’t be a super juiced-up effort to seriously improve the blowout preventer, or a substitute technology.

I got on the phone last week and called around to people who watch the issue. One was Amy Myers Jaffe at Rice University, who is one of the more outspoken analysts. Jaffe is of the view that, in order to prevent catastrophic accidents, there need to be examples made of currently known bad actors. "Fines don’t work," she says. Instead, they should be drummed out of the business if only for a given punitive time period, and some should be jailed. Ultimately, Jaffe says, the only way to truly prevent such cases is to make them potentially a company-ending event.