Spill, Baby, Spill!

[Vivek]

Gary, Whether one is directly employed or not, the fact is all of us depend on oil, be it transportation or the plastic cams I use. We are all affected and connected to it.

Today, one company is in the news. What about the others? Are they all above and beyond? Not by a long shot, unfortunately.

 

[LJL]

Gary,
No sense in beating yourself up over what you were believing and what now becomes a bit more visible once the curtain is pulled back. Every company operates this way, for the most part, in every industry. Look at all the recent news and problems with Toyota. Different industry, same sorts of problems. One just has to remember that they also spend tons of money in PR and marketing, and that is money that could be better spent on actual safety and production improvements, but it is not. Amoco and Arco were no better before BP bought their assets and problems, but once BP owned those assets, they had a responsibility to manage them safely. They chose to spend less on that aspect, and run those operations differently because they were eager to respond to the other "responsibility" of return to their shareholders. This is why this entire thing has no easy fixes. Were companies to follow the rules and regulations to the letter, or even exceed some of them for safety and environmental concerns, we would not be seeing these multi-billion dollar quarterly profits, and then shareholders would be angry and complaining about their investments. There are some delicate balances needed to appease more sides, and many companies fail at this, but we only hear about it when something goes horribly wrong, and light is then shed on all aspects of how money is made, what rules were not followed, etc. For the most part, this ugly dance is not going to change. If more regulations are put in, more ways will be found to get around them or how to abuse others less obviously to make the needed profit. As I mentioned, there are plenty of rules and regulations already in place. They are not being properly enforced in many areas. That has to change, but it will be difficult to do as long as the demand forces companies to make tough choices, which we are constantly reminded are not always good, noble or proper choices. I think a more realistic approach is to start holding people directly responsible, at the top, and not letting them hide behind corporate laws in ways that shield them from responsibilities in these disastrous situations. Corporate laws protections and stuff is great when things are running smoothly, but it really comes into question when you start to see what abuses and breakdowns can result in after disasters like this.

Sorry to sound so "preachy" or "noble" in how I talk about some of this, but having been in many of the boardrooms, planning rooms, and even out on the drilling decks of many of these companies, my eyes were opened very widely about just how dirty this entire business is, both physically and philosophically. As long as there is demand for this resource, and demand by shareholders to show profitability, and demand by consumers for lower prices and more product, things are going to stay ugly.

LJ

 

[monza]

"The federal government is the owner of the waters where drilling takes place and bears ultimate responsibility for what happens on its property."

I think this is coming from a legal perspective as property owner. This ins't perhaps the greatest comparison, but it's similar to what happens at Wal Mart if someone slips and falls and breaks their leg...they are going to go after the property owner. (I'm not making a statement that this is right or wrong.)

I think there are serious doubts that the existing regulations were adequately enforced.

Yep. We are in complete agreement here, Gary.

 

[monza]

Very good points, LJ.

It is indeed a delicate balance as you describe.

Although I have my doubts about the Toyota situation, similar to the Audi situation from the 80s and the Firestone/Explorer media storm from a few years ago. But that's for another time.

 

[LJL]

I think this is coming from a legal perspective as property owner. This ins't perhaps the greatest comparison, but it's similar to what happens at Wal Mart if someone slips and falls and breaks their leg...they are going to go after the property owner. (I'm not making a statement that this is right or wrong.)

This is partly what all the leases and regulations are for. The US owns the property and mineral rights, but is leasing it to an operator that has agreed to perform its operations in accordance with the things outlined in the lease. It is not the fault, nor the responsibility of the landowner if something goes wrong, but it is the responsibility of the operator on that land. In WalMart's case, they are both owner and operator of the stores, so they are responsible for maintaining a safe, hazard free environment for shoppers.

So, is the US Govt. "responsible" for remediation in this spill and disaster? Well, that is not so simple. They did not directly cause any of the conditions related to the well disaster and spill. They also did not hold up their responsibility with respect to making the leaseholder (BP) follow all of the conditions outlined in the lease for safe operation both with respect to workers on their property (OSHA laws and other stuff), and for safe operations with respect to damage to the environment. (Actually, that last part is yet to be determined after all the lawsuits and stuff get filed, and the massive clean-up gets completed.) The US Govt. is responsible to its people for the caretaking of the resources and protection of lives and environment. It seems that it has failed in some of those responsibilities by lack of enforcement or rules and regulations that it put into place for that purpose. They could have shut BP down until all conditions were in conformance. They still can. But they are also somewhat at fault for permitting operations, sidestepping environmental remediation planning, failing to separate interests of safety and monetary recoveries (MMS), and a whole host of other things they are supposed to be doing to protect us and our environment. All of that is in conflict with the pressing need to wean ourselves of dependence on foreign oils, which in turn is impacting our policies as a governed country. See how complicated and intertwined all this quickly becomes? If we shut BP out of operations in the US, we risk not only resource recoveries and revenues that are needed, but we create a new tension with the UK over trade and operations agreements, and we fail to stem the need for even more imported oil from other countries that are not caring at all about our interests or policies. They have it (oil), we do not, so we have to "play nice" with them also in order to get what we want.

Enough policy and politics and all that stuff.....we have a major disaster in the Gulf of Mexico that is going to effect almost all of us in one way or another, but has to be gotten under control sooner than later. Plenty of time for finger-pointing, regulation consideration/reconsideration, policy changes, etc., later, but right now we need to get that well plugged and the oil removed from the water before it does more damage than it has already.

LJ

 

[jlm]

"As long as there is demand for this resource, and demand by shareholders to show profitability, and demand by consumers for lower prices and more product, things are going to stay ugly."

in a nutshell, substitute just about anything for "this resource"

LJL: your analysis is quite well reasoned and presented. I tend to get a bit more emotional when looking at the huge $ numers involved and the inordinately stretched out time frames...was it back in the '70's when Carter asked us to put on a sweater?

 

[stephengilbert]

And when Carter said we should put on a sweater, we laughed at him and turned up the heat.

 

[jlm]

you california guys...

 

[Lars]

I can't help feeling sorry for BP's new chairman, Swede Carl-Henric Svanberg who started January 1st. That guy has some seriously bad luck this year. Svanberg comes from Ericsson where he was CEO for about seven years, and he has a reputation of being one of the good guys. I don't think he's even said anything in public about the spill.

 

[LJL]

Lars, I agree with you about feeling sorry for Svanberg, but only up to a point. He has inherited a company and culture that is vastly different from electronics and stuff, and to be hit with these kinds of problems right out of the gate, cannot be fun. But that is why he is getting paid the big bucks, as they say. Turning all this around is not going to be easy, but BP has some great potential as a company that at least appears to be heading in the direction of diversification of energy resources, and that does require some different kind of thinking.

LJ

 

[monza]

So, is the US Govt. "responsible" for remediation in this spill and disaster?

If you look at my previous posts you'll see my thoughts on this.

The US Govt. is responsible to its people for the caretaking of the resources and protection of lives and environment. It seems that it has failed in some of those responsibilities by lack of enforcement or rules and regulations that it put into place for that purpose. They could have shut BP down until all conditions were in conformance. They still can. But they are also somewhat at fault for permitting operations, sidestepping environmental remediation planning, failing to separate interests of safety and monetary recoveries (MMS), and a whole host of other things they are supposed to be doing to protect us and our environment.

Yep. This forms the entire basis of my opinion why more government regulation isn't the solution to prevent these sorts of things.

Bottom line, there really is NOTHING that can completely prevent. After all, risk of human error (no matter which entity the human works for) can only be reduced, not eliminated.

They have it (oil), we do not, so we have to "play nice" with them also in order to get what we want.

We have plenty of it, we just have policies that discourage and/or disallow drilling for it...

 

[LJL]

Here is some of the latest news on both political and operational fronts:

http://www.nytimes.com/2010/05/19/us/19spill.html

On the topic of having plenty of oil, I respectfully disagree. At the rate the US uses oil and the known reserves, plus probable reserves, plus possible reserves are not even close to cover our thirst. There may yet be significant reserves yet to be discovered, but that is going to take a lot of time and money, and operations in areas that are not favorable, environmentally, politically, technically, and socially. Now, if we just want to throw open all areas for exploration, we may gain a few more percent reserves, but nothing close to what we keep using, and even if we went ahead and approved recovery in some of these areas, it will take years and years to fully develop them, and at costs that are going to be much, much higher than we have seen anywhere else to date.

I am tending to agree that more regulations are not needed as much as enforcing the existing ones properly, and that problem still falls in the government's pervue.

LJ

P.S. My discussions here are primarily based on oil discovery and production. Natural gas is a completely different game. There the US has bountiful supplies. The issue with natgas is transportation.....not easy to move around without lots of expensive pipelines to build and maintain. Not easy to store in quantity, so you have to get it to market quickly, or leave it in the ground. Not easily traded on the world market, because of the transportation and storage issues. Now, if we worked on technologies to make better use of natgas in many aspects of energy use, including portable for vehicles, we have a brighter future, but that is not happening at a pace fast enough to help supplant oil. (As an side, BP wanted Amoco because it had the lion's share of natgas reserves and acreage under lease in North America. It saw natgas as a future fuel, and Amoco had access to more of it than any other company outside of the Middle East (where is was looked upon as an annoying by-product for oil production, except in Qatar), and the North Sea, where transportation distances are small in comparison to North America). Just more perspective on some of this stuff.

 

[M5-Guy]

I watched the CBS 60 Minutes interview of Mike Williams tonight. My god......if his account is correct, it feels like much of what I believed about BP is a sham and a lie.

I didn't think I had any illusions about the company, but now I wonder how deep does the rot really go? How many times have I made silent excuses for BP's safety, environmental and business practices, never admitting to myself that in doing so, I've become part of the problem too? This is really hard to face up to.....I really believed things were different now. Thought the company had changed after the Texas City explosion and the Alaska pipeline spills. This is so much worse. Can't blame Amoco. Can't blame Arco. It's right there in front of me....BP. For 18 years it's been my life.

I watched it too. and it mirrored many other NPR and other global news agencies that interviewed other past BP employees that "Tried" to bring attention to many tests and inconsistencies that were not adding up, and nothing was done to fix it at all.
I would say... Yes... BP ignored -- They had the last word after all, not TransOcean.(or whatever the oil rig company is), to keep the cost down... , the red flags and were "hoping" that nothing would happen with their fingers crossed. They lost that bet of course.

 

[bensonga]

From the Wall Street Journal today:

Disaster Plans Lacking at Deep Rigs
"A huge jolt convulsed an oil rig in the Gulf of Mexico. The pipe down to the well on the ocean floor, more than a mile below, snapped in two. Workers battled a toxic spill.

That was 2003—seven years before last month's Deepwater Horizon disaster, which killed 11 people and sent crude spewing into the sea. And in 2004, managers of BP PLC, the oil giant involved in both incidents, warned in a trade journal that the company wasn't prepared for the long-term, round-the-clock task of dealing with a deep-sea spill."

http://online.wsj.com/article/SB10001424052748703315404575250591376735052.html

After reading this article, let's see a show of hands from those who think we should simply leave it to the oil companies to do the right thing here, from both a safety and environmental perspective....ie without any government regulations and rigorous enforcement of those same regulations.

I don't think the oil companies (BP being a prime example) can protect their own interests in these matters, let alone the interests of the American people.

I'm getting angrier about this with every passing day.

Gary

 

[LJL]

Gary,
As I have commented on in several parts of this thread, there is no way any of us should trust the oil companies to "self-police, self-monitor" when it comes to safety, both of people and the environment. That has never been a primary concern for most of them, and until that changes, they need to have lots of independent (truly non-corrupted) watchdogs checking their every move, plus the ability to not just levy seriously high fines, but to shut them down swiftly if needed. I know that may sound harsh, but it may be the only way they will get their priorities straight, with respect to lives and environment.

And the other interesting piece of news is that several Senators have requested the Justice Department to look into concerns over criminal conduct on the part of BP. The documents they (BP) filed as part of this particular project state they were prepared to deal with any possible problem or disaster, such as a blowout, which they clearly are unable to contain, and have shown difficulty with other similar incidents in the past.

One thing that this has apparently done is cause some folks in Congress to seriously think about taking a pause with respect to further off-shore exploration and production. However, in none of those comments and suggestions was there any mention of how we should be stressing higher levels of conservation also. They are still not addressing the bigger issue of demand, which ultimately will drive other decisions over how to acquire the supply. They (the lawmakers) are still not getting it.

O.K., sorry if that last was a bit too political, but it is still the driving force for this sort of disastrous trajectory in energy policy. (Again, not singling out any party or policy, as none of them are without fault or serious shortcomings. One thing for sure.....the "industry" lobbyists, coupled with past individual interests on the part of too many in government, have certainly done a bang up job of putting a lot more at risk than they ever considered. Sad, sad, sad.)

LJ

 

[monza]

Likewise, it's obvious that government regulation was just as complete a failure.

With regards to demand, what are you suggesting the lawmakers do? Oil is the fuel that drives the engine of economic growth. That's not going to change just because a lawmaker deems it necessary, unless curbing economic growth is the goal, and if that's the case, we need different lawmakers. (This is in fact what Cap and Trade is all about -- a job and economy killer.)

 

[LJL]

Well, a single focus is not going to solve the larger problems. The facts are that we need some seriously expedited activity on alternative fuel options. Yes, oil is a critical component in transportation related use, and that is not going to be switched over anytime soon. However, driving for even higher CAFE standards, permitting more clean diesel and encouraging higher efficiency, clean diesel engines for autos is a start on the conservation side. Eliminating fuel oil heating and electricity generation when natgas or other more renewable sources could be used will also reduce oil consumption (not energy consumption, but more specifically oil, thus keeping more available for transportation based needs). These sorts of things do not have to curb economic growth, but could even be used to stimulate that growth through aggressive programs, tax considerations, new business creation in areas that specifically service these new needs, etc. I am not a politician (thank everybody above, on and below this earth), but it just seems like too many "solutions" are shot down too early, never get support to even be tested, are lost in the sea of "old technologies" that are only protecting old businesses that either need to change or get replaced. All of this is going to cause some pain and disruption, but just putting it off, or "kicking the can down the road" as the phrase goes, is not doing anybody a favor now, or later. We supposedly have the brains and ideas to be creative and productive and inventive, so why are we not seeing more things built and implemented? No need to answer, we all know it is molasses on our electorate that keeps things stuck in yesterday, because it is "easier". Sorry for that rant, but it is more than aggravating to see so many give up or argue against things without even trying, or coming up with alternative solutions. Not aimed at you with that response, but more toward the general politician and pundit community at large. No imagination. No creativity. No spine for progress.

LJ

 

[LJL]

Likewise, it's obvious that government regulation was just as complete a failure.

It might be good to separate the regulation from the enforcement of those regulations in this case. Maybe update or some new things may need to be added, but more importantly, there needs to be a more rigorous enforcement of the existing regulations. Had proper testing and inspections been done on the critical equipment, things might not have gone from very bad to disaster.

LJ

 

[monza]

Either way one looks at it, government failed, just as BP/Transocean failed.

I think I've posted enough examples of how government bureaucracy 'works.' Ironically MMS gave Deepwater a safety award just last year...I have doubts they even have the expertise to properly inspect anything that is thousands of feet below the surface.

It's difficult to have confidence when MMS can't even seem to keep accurate administrative records...according to the AP story linked earlier "The MMS has had long-standing issues with its data management" going back to the 1990s.

 

[LJL]

And this is why Salazar sort of fell on his sword yesterday and stated the there would be some significant shake-up at MMS. Too little, too late for this disaster, but finally the hot spotlight is getting shined where it needs to be, and should result in some changes, hopefully for the better. I am not ready to toss the baby with the bathwater on all things government just yet. Things are fixable, given proper scrutiny, a willingness to make the changes, and backing by a lot of folks that know things have to change. My fear is the continued caving in by internal folks still on the lobbyist's dole for "protecting" the oil industry, versus protecting the people and resources of the US, for which these folks are in jobs. Your other comment about "need different lawmakers" may be an answer, and that message seems to be resonating in some places. But change just to change does not mean things will be better. I would rather see some of these folks now in jobs grow a spine, shun the lobbyist dole, and start looking out for the interest of the people they serve. I know, wishful dreaming, but maybe if a few heads roll and if several lawmaker positions get turned over, the wake-up call may start to be heard. I remain optimistic.....aggravated, but optimistic.

LJ