by Richard R. Loomis, Contributor, World Energy Source. June 23, 2010
Watching the happenings surrounding the Deep Horizon disaster I cannot find better words to describe what is going on here. Last week we witnessed several very odd hearings on Capital Hill, A White House address from the oval office, 20 billion dollars handed over to the administration, and a commission named without any expertise. We have a moratorium in place that a Louisiana federal judge has deemed over reaching and inappropriate. An Interior Secretary that is trying to get around the judgment and who put the moratorium in place sighting fictitious findings from a panel of industry experts as justification. At the end of the day, oil still flows, people are out of work, our leadership is lacking and the price of oil is rising. Does anyone else find this Simply Outrageous?
Over the years we have seen the captains of the largest oil and gas companies in the United States pulled in front of Congress over and over to answer for one wrong doing or another. Sometimes it is pollution, other times it is price gouging, at times even outrageous profits, but never to point fingers at the operations of one of their own. This time each was asked if they would have drilled the well, now leaking, in a different way than BP. The answer, as we all should expect, was yes. Not much of a surprise here. Additionally, each has said that they expect regulations to become more stringent offshore. So the point of the hearing was?
No one would argue that we shouldn’t do the right thing and protect our offshore, but if we are doing the right thing, should the BP explosion tar and feather an entire industry. In this case, that is what we are going to see. Responsible operators, and I put ExxonMobil in that category, are going to have to do things which do not make sense in order to operate in the Gulf of Mexico.
For instance, drilling a relief well at the same time as drilling for target, someone needs to explain to our legislators that instead of being safer, that doubles the chances for a blow out and a major accident. Not to mention, doubles the cost of exploration and reduces the number of wells we can drill by tying up two rigs. If you apply that level of silliness backwards into depths of 500 ft. it will take the majority of the offshore players out of the Gulf of Mexico. Only ExxonMobil, BP, Shell, ConocoPhillips, Chevron and a handful of others will have the ability to take on that kind of adventure.
Additionally, if you raise the liability for a spill beyond the 75 million currently in place, it will be very difficult for the independents to compete. One accident and the company is lost forever. When it is suggested that “one accident and the gulf is lost” and the company should be gone, I would counter that these companies have not had a major accident in 30 years. It is the possibility of an accident that will drive them from the Gulf, not an accident. The risk transfer to insurance or bonding will be far too expensive for most of them.
The hearings were interesting, all of them focused on the misdoings of BP. Well what about the misdoings of our own federal government? The Federal Government has been very quick to claim they were onsite, from day one. President Obama has been down at the coast several times trying to say that he cares and that he is doing everything he can as President. But is he? It took better than two months to suspend the Jones Act, keeping assistance from other countries from flowing into the Gulf. It took several weeks to approve the building of burms off the coast of Louisiana. Boats used to “suck up the oil” are stuck in port because of red tape surrounding fire extinguishers. New and innovative technology providers are not even given an audience to look and see if their solution will work. Others are driven away by the environmental liability their companies might need to absorb in order to participate.
On top of all of this, now the administration is also going to dole out the compensation money from BP. So not only are they handling the very slow and bumbling response in the water and on the coast, now they are going to handle $20 billion in claims? This should be fun to watch, and tragic to cover as the people hurt by this spill are going to be dragged along by the Federal agency newly created to handle this part of the process. Has anyone noticed that we still have people living in FEMA trailers from the last time the government compensated Louisiana for a major loss.
The net result of all of this transfer of responsibility, Tony Hayward the CEO of BP goes sailing. Well why shouldn’t he, President Obama went to a baseball game and decided to take a day off to play golf. At least Tony is out on the water doing something.
To make matters worse, we can look at the commission that the President has appointed to “look into this matter” and follow the trail wherever it leads. First we have the co-chairs. Co-chairman: Former Democratic Sen. and Gov. Bob Graham of Florida and William K. Reilly, Environmental Protection Agency administrator under President George H.W. Bush and during the Exxon Valdez spill in Alaska in 1989. Neither one has ever drilled a well, but both have been outspoken in their opposition to offshore drilling. However, it is still one Democrat and one Republican so that’s a plus on the side of balance. You would expect that they would have appointees to help them that probably know something about this, right.
Wrong, let’s look at the rest of the team. First we have Frances Beinecke, president of the Natural Resources Defense Council; then Donald Boesch, president of the University of Maryland's Center for Environmental Science; Terry Garcia, a National Geographic Society executive and former chief lawyer at the National Oceanic and Atmospheric Administration under President Bill Clinton; Cherry Murray, dean of Harvard's engineering school and former president of the American Physical Society; and Frances Ulmer see note above, Chancellor of the University of Alaska, Anchorage, and former Democratic Lieutenant Governor of Alaska.
While academia and the anti-hydrocarbon agenda are well represented I don’t see anyone on this panel that has ever drilled a well, much less a well in the Gulf of Mexico in deep water. I am not sure why this panel even needs to get started, we could just jump to the end and write the impassioned report that we need to end our reliance on the hydrocarbon and save the tax payers’ money. If the President is complaining about BP spending money on advertising, what should we really be calling this?
Again, Simply Outrageous, we have a company that has created a major environmental disaster. We have an industry that provides the “industrial oxygen” for our economy, and a president that prefers going golfing to actually trying to do something about this spill. Very soon we will see that new regulations and laws will be enacted at the recommendation of a panel that has never been offshore. “Outer Continental Shelf Management Reform Act” is only the first of such bills and is the beginning of the broader “Tarbanes” that is coming to the industry. We will see a flight of independents leaving the Gulf of Mexico and trying to find other places to drill. We will see 55,000 employees losing their jobs and countless other companies going out of business along the gulf coast, right along with the fishing and tourism industries all ready in jeopardy. We will watch the President pay off the most vocal with BPs money and the only ones who benefit from this long term, oil producing nations around the world. All of them know that the US will continue to import oil, now more of it, and if we do manage to wean off some of it, China’s growth will more than take up the slack.
“Simply Outrageous” is an understatement, those in charge need to stop playing golf, making speeches, and taking off to go boating. Instead of holding hearings on what went wrong, let’s begin looking at what is going wrong now. If we cannot stop the well from leaking at the source, we need to focus on the surface. If the Dutch have skimmers, we need them out in the Gulf. If the fishing fleet can corral the oil, we need to get them busy. The states need to be allowed to get busy defending our shores and building whatever barricades we can to help stop and ultimately collect the oil. We need to stop worrying about how much money BP has and get the very best this industry has on board to evaluate new technologies, and old ones that might have a hope in stemming this crisis. If other countries have better expertise in this, we need to get them involved.
Someone needs to point out that if we are pulling together a commission to discuss deepwater drilling we had better define what constitutes deep water drilling. We need to locate some experts in the field and include them in the process. If we leave our future to the legislators, the academics, and this administration we are guaranteed to get the worst possible of outcomes.
We need to show the people of the United States that both our Federal government and our industry can walk and chew gum at the same time. If we don’t, more than one industry is in jeopardy of being forced out of the United States, ecosystems are going to be destroyed and we will be writing the history books how the Exxon Valdez was not that a big a deal when compared to this. The Valdez did not put an end to the hydrocarbon era, this spill will not put an end to the hydrocarbon era, however the way we are handling this could put an end to our fragile economic recovery.
© 2010 Richard Loomis
Richard Loomis | President & CEO, World Energy
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