As many of you know, your humble correspondent is a veteran of 32 years of service in the oil and gas industry, currently serving as the operations manager for a small Gulf of Mexico exploration and production company. This week, the President’s Oil Spill Commission published its 380-page report on the BP blowout and spill on the Deepwater Horizon. I won’t pretend to have read the thing, but there are a few recommendations and outcomes worth commenting upon.
Panel: More reform needed to prevent future spills
When asked about the likelihood Congress would enact some of its suggestions, especially with a Republican majority in Congress looking to curb government regulation and spending, panel co-chair and former Florida Democratic Senator Bob Graham said that the magnitude of the disaster “would override an ideological preference for less government, less government intrusion, less government cost.” …
The panel said Congress should draft legislation to create within the Interior Department an independent safety agency and a separate environmental office to evaluate the risks of oil drilling to natural resources. Such a change would not require any additional funding.
Two new bureaucracies, eh? Color me unsurprised.
Reading these government reports, one gets the impression that the oil and gas business would conduct itself like the Seventh Fleet on shore leave, were it not for the stalwart defenders of safety and the environment embodied in the Department of the Interior’s inspectors.
In the wake of the BP Spill, we’ve seen a raft of new regulatory initiatives from the BOEMRE, the Interior agency which has oversight responsibilities for offshore oil and gas operations. Many of the new regs have nothing to do with addressing the problems of BP or Transocean at Macondo. Some of the new requirements for drilling wells arguably don’t add a margin of safety and may even increase the risk of a well’s failure. Industry’s attempts to convince the regulators of this, however, have fallen upon deaf ears. There’s a new sheriff in town, and he aims to let everyone know who’s boss.
In fact, the oil and gas extraction industry has an excellent (and improving) safety and environmental record, a record that is better than most heavy industries. That’s especially remarkable in an industry that operates 24/7/365 in the hostile, corrosive marine environment. Industry practices do not reflect fear of the government regulator (BOEMRE), but rather the fact that safe and pollution-free operations are proven to be more efficient and cost-effective. There has never been a profitable spill or an accident that made money.
Take BP’s Macondo, for instance. That was a 50 million barrel discovery, according to the word on the street. At $80 per barrel, that’s a gross value of $4 billion dollars. Add the value of the 100 billion cubic feet or so of natural gas: another $400 million. Out of that $4.4 billion, the government’s take is 18.75% of the gross, or $875 million in royalties alone. (That’s on top of the $35 million they got when the lease was granted.)
That leaves over $3.5 billion in future product value, if you just don’t screw it up. Lots of BP decisions have been criticized as having been about saving money over safety. A $10 million saving (say, on a well design decision) pales compared to the $3.5 billion asset you put at risk to save it. Even worse, the cost of the cleanup and damages will be on the order of $35 billion, so the savings were something like $300 per $1 million at risk.
So who does the Commission blame? BP, Halliburton and Transocean, not surprisingly, and as operator BP made most of the key decisions. Who within BP, you might ask, made those key decisions?
BP Engineer John Guide Singled Out in Presidential Spill Report
The report’s singling out of Guide comes five days after Co-Chairman William Reilly said BP was the “centrally responsible company in the Macondo blowout.”
Guide, a University of Pittsburgh-trained engineer, led the $154.6 million Macondo project from an office complex in Houston at the time of the April 20 blowout that left 17 workers injured and destroyed the $365 million vessel. …
Four days before the explosion, Guide overruled recommendations by BP and Halliburton Co. technicians to more than triple the number of centralizers used to keep the well’s metal casing pipe centered while cement was poured around the sides, the panel said, citing internal BP memos.
Halliburton, the Houston-based provider of cement for the well, warned BP that failure to use more centralizers left the well susceptible to a gas influx. BP engineer Gregory Walz urged Guide to heed Halliburton’s advice and told his boss that 15 additional centralizers could be shipped to the rig, the panel said.
Guide rejected the plan to use the extra centralizers, saying they were the wrong design, the panel said.
It would suck to be John Guide.
In testimony before the joint Coast Guard-Interior Department board in August, BP vice presidents Patrick O’Bryan and David Sims singled out Guide as holding ultimate authority for decisions regarding the structure and drilling of the Macondo well.
In the blogging I’ve done about the BP spill, I’ve held off being overly critical of BP’s operations and decisions, partly because 1) my only source of information is the press, and 2) “There but for the grace of God go I.” Sometimes circumstances in this risky business force decisions to be made where there is no clear-cut choice. I’ve lost more than a couple of sleepless nights wondering if that 11 p.m. decision would turn out to be the right course of action. The troubling thing with BP is that some of Mr. Guide’s decisions appear to have overridden technical recommendations made by his vendors and by his subordinates.
The challenge is writing a comprehensive operations manual for a business that stays on the forefront of technology. You can’t possibly anticipate every circumstance that might happen at 3:30 in the morning on an 18,000 foot well located in 5,000 feet of water.
But as daunting as that management challenge is to the oil company, it is folly to expect a government agency to impose a regulatory structure that totally removes the risk from the process of oil drilling. A bureaucracy can never be as nimble, creative and motivated as the private sector. Government can never anticipate the technological innovation or the new frontiers that industry needs to explore. And a bureaucrat will never be accountable for the results, as Mr. Guide is.
Industry has a good track record of learning from its mistakes. The best example of that is the “subsurface safety valve”, the little device required in every offshore producing well that prevents a blowout in the event of a catastrophic failure, like a platform collapse. With hundreds of platforms down in Hurricanes Ivan, Katrina, Rita, Gustav and Ike, thousands of SSV did their jobs with zero significant failures and near zero pollution.
Bottom line: 5% of the new rules and regulations that come out of BOEMRE’s initiatives, along with the Commission’s recommendations, will make deepwater offshore drilling and production safer. (I maintain that shallow water operations never demonstrated any safety and environmental problems to begin with.)The same type of recommendations were identified by the National Academy of Engineering panel back in May, common-sense changes that would have been embraced by industry anyway. The other 95% will stifle and suffocate industry without adding any meaningful margin of safety. Some of them will make processes less safe.
In closing, Thomas J. Pyle of the Institute for Energy Research has some interesting observations in his post at the National Journal:
The Truth Will Set the Gulf Economy Free
In drilling the Macondo well, BP failed to meet industry standards regarding well design, and their management improperly interpreted multiple tests that revealed serious problems. While this evidence points to a serious problem with one company, the politically motivated panel has, not surprisingly, attempted to use this report to tackle broader issues – namely the future of offshore development in the U.S.
The President’s Commission has, unfortunately, become an activist vessel to shoot holes in any plan for expanded production. How else could you explain the findings in the commission’s report, which seems to indict BP for its mismanagement while convicting the entire industry in the process?
The commission – charged with understanding the technical intricacies of a failed offshore well – does not contain a single member with experience in the oil and gas industry. It instead consists of former and current green activists, lawyers, and professors. …
Unfortunately, the facts have been largely ignored or overlooked in the Administration’s response, inflicting a significant toll on the regional economy. The federal moratorium and the permitting freeze which continues to devastate the Gulf were issued under the assumption that the entire industry must be at fault. As a result, 20,000 jobs were eliminated through September, and more are disappearing daily. Following the April spill, Louisiana unemployment has risen from 6.2% to 8.2% in the most recent data available. The disastrous economic effects are clear, but the causes for these policies are not.
There has been no evidence to suggest that the BP well blowout reflects an industry wide problem. In fact, the evidence points to the exact opposite. By suggesting that the problem is somehow industry-wide, the Commission makes a grievous and inexcusable error.
Cross-posted at VladEnBlog.
Moe Lane
Erick Erickson
Jeff Emanuel
Steve Maley
Caleb Howe
Dan Spencer
bureacracies
gumpy Thursday, January 13th at 8:14AM EDT (link)I wonder how the author felt about the creation of the enormous Department of Homelend Security over simply fixing the broken agencies of the FBI, CIA and NSA?
If you Had Been Around
edintexas Thursday, January 13th at 9:34AM EDT (link)If you had been around more than (roughly) 48 hours, you wouldn’t have to bother asking the question. If you were a Conservative, you would instinctively know that government regulation is generally a waste of the taxpayer’s money, and creating massive government bureaucracies simply magnifies the problems inherent in bureaucratic agencies. Vladimir is a Conservative.
I could be wrong in believing you are “trolling”, and you are here to learn and contribute. I was wrong once.
Oh, and you obviously failed
edintexas Thursday, January 13th at 9:40AM EDT (link)You obviously failed to give consideration to his argument for why the industry adopts and applies safe practices – the economic argument that it simply costs too much to ignore these practices. Remember the line about BP losing billions of USD on the lost production occasioned by this accident?
no one
gumpy Thursday, January 13th at 11:43AM EDT (link)no one that approved Bush’s outrageous expansion of government in the name of “Homeland Security” is a true conservative. That was the most extewnsive expansion of government ever. . .and for WHAT?
But the diary isn't about Bush.
gekster (Diary) Thursday, January 13th at 11:47AM EDT (link)Reread the article and try again.
They say Republicans are for the rich, Democrats are for the poor.
If they need more voters,
then they have to make more of who they are for.
We are there in the various Tea Party groups, leaderless, but not rudderless.
We steer always toward the Constitutional principles this nation was founded upon.
Erick Brockway
I’ve gone from
“Hope and Change” to
“Hopeless and Changeless”
the Constitution?
gumpy Thursday, January 13th at 12:09PM EDT (link)I will not threadjack
I will not threadjack
I will not threadjack
I will not threadjack
I will not threadjack
I will not threadjack
Obviously you have a reading comprehension problem.
gekster (Diary) Thursday, January 13th at 12:20PM EDT (link)The article is about oil and regulations.
Where did I mention the Constitution and taxes.
I take it you have a public school education.
And as much as we know how lame that can be,
I don’t think yours could even reach that level..
They say Republicans are for the rich, Democrats are for the poor.
If they need more voters,
then they have to make more of who they are for.
We are there in the various Tea Party groups, leaderless, but not rudderless.
We steer always toward the Constitutional principles this nation was founded upon.
Erick Brockway
I’ve gone from
“Hope and Change” to
“Hopeless and Changeless”
i will not threadjack
gumpy Thursday, January 13th at 2:14PM EDT (link)I did not write that post. . .
some ignorant jackass threadjacked it. SHAME.
probably the same one
streiff (Diary) Thursday, January 13th at 2:15PM EDT (link)who just banned you for not having a sense of humor
“What keeps me here is the reek of beer, the ladies and the craic”
Trivia question - how many new agencies has Obama created? [nt]
acat (Diary) Thursday, January 13th at 8:17AM EDT (link)——
Caveat Suffragator
We'd be better served if the Industry formed a group to review deep water drilling practices
ehosterman (Diary) Thursday, January 13th at 9:15AM EDT (link)A model would be INPO (Institute for Nuclear Pwer Operations) formed by the nuclear industry to review operational practices after the TMI accident. INPO was formed from all of the nuclear utilities in the country and performs audits of utility operating practices and grades individual utilities. It’s not a governmental agency, but is able to exert a greta del of peer pressure on individual utilities. The NRC also pays a lot of attention to the INPO audits. I would think a similar consortum of deep water drillers would be a lot more effective than some governmental agency.
This will change
edintexas Thursday, January 13th at 9:37AM EDT (link)If the Nuclear Power Industry actually manages to make a comeback and start construction of new facilities, there will be great efforts to establish new bureaucracies to “oversee” the industry.
There is no need for new bureaucracies.
ehosterman (Diary) Thursday, January 13th at 5:21PM EDT (link)The USNRC is bureaucratic enough. They are one of the reasons that the US nuclear plants still largely have analog controls because they can’t agree on digital security standards. They also prevent the industry form adopting the latest ASME code cases in a timely fashion, if at all.
ehosterman: the panel has already floated that idea.
Steve Maley (Diary) Thursday, January 13th at 10:22AM EDT (link)See here.
The industry does have a standards-setting body, the American Petroleum Institute, kind of like ASME similar bodies in other industries. They publish “recommended practices” for a wide range of industry operations, but as I alluded in the OP, it is difficult for a bureaucratic body (whether it be government, a major corporation or the API) to anticipate technology and adapt to it faster than it is developed.
There is also an exchange of technical and operating information in professional societies such as the Society of Petroleum Engineers, of which I am a member.
We are also members of the Offshore Operators Committee, where information on safe operating practices is shared.
New drilling rules require well designs to be reviewed by licensed professional engineers, which will make a lot of work for consultants. One problem with that is that changes to an approved design (which can be frequent) will have to be reviewed by an engineer also. If the original guy is available, that’s not a problem. If he happens to be on vacation, that’s a problem.
What we don’t do is have a peer-review process for well designs. There is not one safe way to do things, and different companies have different philosophies. There is also a lot of proprietary competitive information (geologic interpretations, etc.) that these operators would be very reluctant to share.
If the objective is to put deepwater drilling in the same deep freeze that we put new nuclear power plants in for the last 30 years, then maybe an INPO-style body is the way to go.
The blogger formerly known as ‘Vladimir’.
More reaction from industry groups...
Steve Maley (Diary) Thursday, January 13th at 10:35AM EDT (link)…here.
The blogger formerly known as ‘Vladimir’.
I probably wasn't clear enough
ehosterman (Diary) Thursday, January 13th at 1:40PM EDT (link)INPO doesn’t review designs in the nuclear industry. They review operational, maintenance and management practices. From what I read, ther were issues in operational decision making during the drilling and operation of The rig that contribuited to the accident, that went beyond well design issues. That’s wher an INPO style group might have value.
There may be some merit to that.
Steve Maley (Diary) Thursday, January 13th at 3:00PM EDT (link)One of the issues wrt to the Deepwater Horizon seems to be the lack of attention paid by Transocean, the drilling contractor, to maintenance of the subsea equipment, in particular the blowout preventer and the riser disconnect.
The oil company that hires the rig has accountability for such things, but rarely has the expertise to enforce & audit. The rigs are foreign flagged, so the Feds have only Coast Guard jurisdiction. Inspections in the past have centered on auditing test records and other paperwork.
Since the rigs work (typically) for a variety of oil companies, it may make some sense to have an industry standards body certify them. If the gov’t runs it, I’d have little confidence in the results.
The blogger formerly known as ‘Vladimir’.
You nailed it.
hertfordkc (Diary) Thursday, January 13th at 9:48AM EDT (link)As a 30+ year veteran of the oil industry, it is amazing that the public, the media, and our government fail to understand that refinery outages, pipeline leaks, and drilling platform catastrophes are extremely costly. Safety is preached daily throughout the industry.
Industry groups meet regularly to review best practices. The notion that another group of regulators with little or no experience can eliminate risk is ludicrous, not only for the oil industry but most business enterprises.
the nail is in the coffin.
boxedquad Friday, January 14th at 7:42AM EDT (link)I worked in the Nuc. Pwr Industry for many years and with the NRC during startups and security functions. They were a little better than some of the utility pukes I was forced to work with. When things could go wrong, most just ducked and covered their butts. Real leaders were few and far between in that industry. Can the Oil Industry have the same problem? I watched the tar sand projects almost fail and one company after another just get out of the way, as cost mandates escalated.
More government is not an answer, more industry standards and review by KNOWING REAL PROFESSIONALS AND ENGINEERS makes sense. The NRC helped get the greenies out of the obstructionizm practices and let plants be built. Too bad the cost were delayed and interest during construction was allowed by the regulators.. Killed the industry one dollar at a time. That same thing will happen in the Oil industry if they are allowed to continue with the un-KNOWING LEADERS.
And in other news...
Steve Maley (Diary) Thursday, January 13th at 10:03AM EDT (link)Link.
The blogger formerly known as ‘Vladimir’.
I think that the real problem is a lack of courage
romeg Thursday, January 13th at 1:24PM EDT (link)on the part of legislators and the president. F. Lee Bailey once wrote that “There is NOTHING less grand than a Grand Jury.” A corollary to that would be that there is nothing less presidential than a Presidential Commission.
Leadership demands that elected officials assume responsibility and accountability for their acts. What we have been doing for far too long is allowing them to hide behind the recommendations of various panels of experts rather than doing their own fact finding and arriving at proper legislative responses or, in this instance, NO legislative response. There are ample provisions of both civil and criminal statutes to hold those responsible accountable for this disaster and the lives lost and forever altered as a consequence.
“Of all tyrannies a tyranny sincerely exercised for the good of its victim may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.” – C. S. Lewis
Everyone needs to contact speaker Boehener
johnnyd (Diary) Thursday, January 13th at 3:17PM EDT (link)And demand that they put Nuclear Power, oil refinery construction and oil drilling a PRIORITY,
I have always said that the best way to help the war against TERRORISM is to stop our dependency on oil. It is obvious that our current “green” energy is not a solution for the near future.
We could put allot of people to work and it is just common sense. But I would like to construct these without the UNIONS wasteful ways. My wifes uncle was an electrician working on the Clinton, IL Nuclear Power plant and he told us about the waste and common procedures implemented that prolonged the time it took to complete the construction.
I would look at putting Donald Trump in charge of the construction of all the plants.
I have been in 2 unions one was local and the other was SEIU for for the same company. I was not in that union very long.
House Natural Resources Comm to hold hearing on the 26th
ladyimpactohio (Diary) Thursday, January 13th at 6:00PM EDT (link)WASHINGTON, D.C., January 11, 2011 – House Natural Resources Committee Chairman Doc Hastings (WA-04) released the following statement regarding the final report and recommendations from the President’s National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. The House Natural Resources Committee is scheduled to hold a hearing, with testimony from Commission Co-Chairs William Reilly and Bob Graham, on Wednesday, January 26th at 2:00 PM.
http://resourcescommittee.house.gov/News/DocumentSingle.aspx?DocumentID=219525
We the people tell government what to do, it does not tell us.–Ronald Reagan in his farewell speech
Vlad, you were wrong. The dang thing is 398 pages, not 380..
ladyimpactohio (Diary) Thursday, January 13th at 6:46PM EDT (link)LOL
http://www.oilspillcommission.gov/sites/default/files/documents/DEEPWATER_ReporttothePresident_FINAL.pdf
Anyone who wants to read, knock yourselves out.
We the people tell government what to do, it does not tell us.–Ronald Reagan in his farewell speech
Two Radical Suggestions
Repair_Man_Jack (Diary) Thursday, January 13th at 11:58PM EDT (link)1) Have the current Bureauocracy do its assigned job before creating more. The BP site had waivers from the current NEPA laws. I’m not convinced the well would have been allowed to operate, had the actual law of the land been enforced as it was written and passed.
2) Follow the remediation SOPs that are required to exist. Every USCG region has to have an oil spill SOP on file. The one for Gulf of Mexico was immediately tossed in the trash, as soon as actual oil went into the water.
Before demanding more Government, let’s try actually using the one we already have.
Mr. Obama is pretending that an economic “recovery” is underway when he knows damn well that the banking system is just blowing smoke up the shredded *** of what’s left of that economy – James Howard Kunstler
Ask Government to actually work, get real.
boxedquad Friday, January 14th at 8:12AM EDT (link)Asking a brick to jump up and become a wall is not going to get a wall built. You are not real, government today is there to keep work from happening, so that THEY can complain, criticize and condemn someone ELSE. No matter how well the plan was, the plans always seem to fade away. Sort of like the speech you planned to give, the speech you gave and the speech you wish you would have given.
I agree with Repair_man_ jack: make the Government do what it said it was going to do.
TSA is a good example of how not to work and Homeland Security is peopled by Pols who don’t know.jack….***.well you get my point.
Shades of evacuation plans for New Orleans, all it took to NOT be used was one person, not to take the plan off the shelve.
Another department, huh Bob? is that all ya got?
towerclimber Friday, January 14th at 8:43AM EDT (link)Correct me please, if I’m wrong, but wasn’t the department of energy created to wean us off of our dependence on foreign oil by Jimmy Carter??
We see how well THAT has worked. Not only has it not done what it was supposed to do, but it’s grown in size and cost.
I fail to see how another government office is going to do ANYTHING aside from suck down more money.
amiright?
“The ultimate result of shielding man from the effects of his folly is to fill the world with fools.”
Herbert Spencer
I read BP's Drillling Request & the OSRP for the Macondo well
anjinconsulting Friday, January 14th at 9:48AM EDT (link)It was pretty obvious that the MMS office rubber-stamped it, and that the document was just some cut and paste tome.
If the government wants any credibility, they could start with holding the lackeys in the MMS office accountable for their approval based on such fraudulent documentation, and then hold offshore operators accountable for what they signed up for in their OSRP.
Then they could pitch the commission and the report since no one on the commision has any actial experience in conducting offshore opreations, let alone doing so profitably and safely.
Those who fail to learn history are doomed to repeat it. – George Santayana
No man has any more intrinsic right to offical station than another. Those who hold government jobs for a long time are apt to acquire a habit of looking with indifference upon the public interests, and of tolerating conduct from which an unpracticed man would revolt. – Andrew Jackson
I read BP's Drillling Request & the OSRP for the Macondo well
anjinconsulting Friday, January 14th at 9:48AM EDT (link)It was pretty obvious that the MMS office rubber-stamped it, and that the document was just some cut and paste tome.
If the government wants any credibility, they could start with holding the lackeys in the MMS office accountable for their approval based on such fraudulent documentation, and then hold offshore operators accountable for what they signed up for in their OSRP.
Then they could pitch the commission and the report since no one on the commision has any actial experience in conducting offshore opreations, let alone doing so profitably and safely.
Those who fail to learn history are doomed to repeat it. – George Santayana
No man has any more intrinsic right to offical station than another. Those who hold government jobs for a long time are apt to acquire a habit of looking with indifference upon the public interests, and of tolerating conduct from which an unpracticed man would revolt. – Andrew Jackson
Affirmative Action Ethnic Minority admins
miroco Friday, January 14th at 12:58PM EDT (link)hate oil, hate oil companies, hate success, hate America. They really love bureaucracies so they can have jobs where they don’t even know what they are doing. My Texas secession movement is gaining as many advocates as my repeal the nineteenth movement. Keep that racist sexist crew in charge much longer and I may Run for KING, Eric can be my prime minister and Moe can be court Jester.
And the hits keep on coming...
uselogic Friday, January 14th at 1:05PM EDT (link)from this regime:
http://www.politico.com/news/stories/0111/47557.html#comments
EPA pulls an already issued permit for WV coal mine. 1st time ever. Over obljections of both WV Senators Lisa Jackson says they are “just enforcing the pervious administration’s laws”. Even though previous admin issued the permit. Typical….cause harm to this nation but blame Bush.
2012 can not come soon enough.
And the hits keep on coming...
uselogic Friday, January 14th at 1:05PM EDT (link)from this regime:
http://www.politico.com/news/stories/0111/47557.html#comments
EPA pulls an already issued permit for WV coal mine. 1st time ever. Over obljections of both WV Senators Lisa Jackson says they are “just enforcing the pervious administration’s laws”. Even though previous admin issued the permit. Typical….cause harm to this nation but blame Bush.
2012 can not come soon enough.
The Commission
awunsch Friday, January 14th at 5:26PM EDT (link)will obviously be considered a success – they recommended two new bureaucracies. Most of us have to buy gasoline every day and watch the fluctuation which seems to have no logic to it. That usually doesn’t lead to one loving the oil and gas industry. However, it is irresponsible not to encourage drilling for our own natural resources at this time and to develop a sound energy policy that can guide us toward whatever changes make sense – nuclear, hydrogen, solar etc. This administration, however, does not set its sight on a prosperous, successful country but rather on some green utopia that is neither achievable nor resembles anything like the constitutional republic that we have known for many years. They may try to sound like they do but their policies and attempted legislation say otherwise. That these policies may result in the destruction of America also doesn’t seem to bother them.
It is all deliberate
gwalt Saturday, January 15th at 10:07AM EDT (link)Obama wants the country brought to its knees and more dependent on government. With less drilling comes less fuel at higher costs and food prices thru the roof.
Without the complicit help of the lying, corrupt media, Obama wouldn’t be anywhere near making decisions on energy for our future. With gas over 3 dollars a gallon, where is the media crying about how much it costs lower income people (and minorities) to get to their jobs?
They are in the tank, as in toilet tank, for Obama. Republicans need to hold a press conference every day and put out press releases to talk to the American people above the media’s heads. We have to do something because everything this so-called president does is to bring us down. He calls it Social Justice. I call it a crime.
“A lot of briefing for a 2 hr. special with Dan Rather. Saw the show & wonder why we bothered”. –Ronald Reagan, The Reagan Diaries (January 27, 1982)