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The BP Accident: Some Thoughts

donsutherland1

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By the time the oil leak has finally been stemmed, one will likely witness an evolution of events not dissimilar to past major accidents/crises, including the Torrey Canyon spill (1967), North Sea blowout (1977) and Exxon-Valdez spill (1989). An inquiry into the accident will almost certainly find that human error and/or negligence was largely or wholly responsible for the accident. More specifically, “cutting corners” e.g., a bid to save costs, was likely a central contributing factor and it is not implausible that the recent financial crisis, which knocked down the price of oil, helped amplify pressures to take shortcuts. If so, the probability of accidents in other relatively high-risk industries could currently be above normal.

The Obama Administration’s standing among the public will be hurt. Questions as to why the Jones Act was not waived, troops were not deployed to clean beaches/help with efforts to deploy spill containment equipment, the President did not meet with the CEO of BP until nearly two months after the rig explosion, among others will be asked. During crises leaders need to act decisively and boldly before the public. Any hint of hesitation is damaging in the public image. Tonight’s Oval Office address by the President will not rehabilitate his image on the leak. He might receive a temporary boost, but the continuation of the leak and growing magnitude of its impact will cause the above-noted questions, among others, to reassert themselves. The upcoming 2010 campaigns will likely seek to exploit any actual or perceived weaknesses in the handling of the accident. In short, it is unlikely that the Obama Administration will be able to cite its response to the BP oil leak as an exercise of strong, effective leadership. Instead, it will be confronted with trying to contain the hit to its reputation that will likely be incurred on account of that accident and to limit the political fallout that could result.

Oil industry executives and policy makers alike will ask the question as to why they didn’t foresee the kind of accident that occurred. Certainly, if one assesses all links of a value chain, of equipment, etc., a logical question should have entailed what might happen if a blowout preventer failed. From there, one would ask what measures would be necessary to address the consequences of such a failure. The human tendency to underestimate the scale of the accident will also resurface.

BP has already committed to paying the cleanup costs and all other “legitimate” costs related to the accident. Nevertheless, perhaps driven by growing public anger and political opportunism, there may well be a temptation among some policy makers to overreach and demand far more compensation. Demands for an escrow account could morph into threats of asset seizures. Legal writs could be pursued against BP's assets if policy makers are not satisfied with BP's efforts related to compensation. If BP feels it is faced with an existential threat, BP will almost certainly countersue or, in a worst-case scenario file for bankruptcy. Either way, prospects for full reimbursement of the cleanup costs could diminish, as courts might have little choice but to uphold existing liability limits or a bankruptcy judgment limits BP’s overall liability. In addition, those seeking reimbursement for the cleanup could incur legal costs in the process. Their legal costs could be significant if the litigation lasts for years, as would be possible given the complexities of the case. A legal settlement might also result in less-than-full reimbursement. A proliferation of private lawsuits could also lead to BP’s making legal moves to limit its liability. Political overreach could also, to some extent, chill U.S.-U.K. relations, and damage the United States’ image as a good place to do business.

In the weeks, months, and possibly years ahead, the oil industry will come under increasing scrutiny within and outside the United States. If today’s testimony is accurate and the oil companies presently lack effective plans for dealing with deepwater drilling accidents, deepwater drilling activities could be limited in some venues until such plans are developed. Trust in oil company projections will also be diminished. After all, some of the contingency plans claimed to have been capable of dealing with leaks of up to 250,000 barrels per day. Those projections were woefully off the mark. Therefore, standards of evidence demanded by regulators will likely be increased. Additional safety regulations could be developed and implemented. Legislation addressing liability issues, possibly creating a prefunded cleanup mechanism could be adopted in one or more countries. Even a new international convention that deals with deepwater-related issues might be proposed or even pursued. To head off regulation that they perceive as excessively costly, it is plausible that at least some of the major oil companies could seek to pool knowledge/expertise and collaborate on developing a common response to deepwater accidents, and even a common fund for dealing with cleanup costs.

Issues of unintended consequences of leak/spill mitigation could come to the forefront. Questions as to whether the chemicals deployed might have caused more harm than good could be raised. Issues as to whether the oil itself or chemicals used to attack the leak might have an adverse food chain impact, including an impact on human consumption, could be asked. Litigation could well erupt on those fronts.

On the brighter side, the accident will increase pressure for innovation. Innovation could take the form of new technologies that facilitate deepwater safety, improve responses to well blowouts, and facilitate the ability to mitigate the impact of accidents. Innovation could also occur on the alternative energy front, especially if some governments make a meaningful and sustained R&D commitment to alternative energies in a bid to reduce the risks of deepwater-related accidents.
 
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I'm Supposn

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Competent and prudent people are involved or are the cause of fewer accidents. The accidents they are involved in are generally less costly to themselves and others. The same is true of human organizations.

Reagan’s B.S. that “Government’s not the answer but the problem” is no more intelligent than stating corporations are not the answer but the problem. Both statements are equally foolish.

I mistrust to the extent that I fear entities’ capability to exercise their discretion and arbitrarily intervene with me or mine. I’m particularly fearful when the intervening bureaucracy is not answerable to scrutiny by branches of government.

Among our government’s finest attributes is the division of power and the checks and balances due to those divisions of powers. Government of laws rather than of men is not an empty phrase. I have more confidence in explicit laws diligently enforced by a government answerable to voters rather than to CEO’s that are answerable to a board of directors and stockholders.

The oil rupture within the gulf is due to lack of government regulation, government’s failure to enforce what regulations were applicable and the nonsense of “self regulation”. Harm due to government regulation is insignificantly less than the immensely greater ham due to unregulated corporations.

Respectfully, Supposn
 

samsmart

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Personally, I'm hoping that this will lead to Congress writing better laws regarding disaster response legislation. I think Congress should write a law stating that businesses involved in a service that could cause massive environmental damage should be forced to work with the Department of Homeland Security and the Environmental Protection Agency in writing up response plans to be pursued in case of such a disaster. Once a response plan between a business and the federal government has been agreed upon, the federal government should investigate these businesses to ensure they have and maintain the assets needed to enact the response plan. These response plans should be up for review every 5 years and updated every 10 years. This way, there's no question or delay in responses to such disasters.

But that idea makes common sense, and doesn't take into account any particular ideologies, agendas, or special interests, which means it probably won't get passed in Congress.
 

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Competent and prudent people are involved or are the cause of fewer accidents. The accidents they are involved in are generally less costly to themselves and others. The same is true of human organizations.

Reagan’s B.S. that “Government’s not the answer but the problem” is no more intelligent than stating corporations are not the answer but the problem. Both statements are equally foolish.

I mistrust to the extent that I fear entities’ capability to exercise their discretion and arbitrarily intervene with me or mine. I’m particularly fearful when the intervening bureaucracy is not answerable to scrutiny by branches of government.

Among our government’s finest attributes is the division of power and the checks and balances due to those divisions of powers. Government of laws rather than of men is not an empty phrase. I have more confidence in explicit laws diligently enforced by a government answerable to voters rather than to CEO’s that are answerable to a board of directors and stockholders.

The oil rupture within the gulf is due to lack of government regulation, government’s failure to enforce what regulations were applicable and the nonsense of “self regulation”. Harm due to government regulation is insignificantly less than the immensely greater ham due to unregulated corporations.

Respectfully, Supposn

I agree wholeheartedly until you get to your last paragraph. I dont blaim the gov one bit for the accident, what I do blaim on the government is not having regulations requiring oil companies to have a plan on how to deal with such, and not having regulations requiring oil companies to have access to the equipment needed to deal with such an accident.

I'ts really not the gov.'s fault that accidents happen, it is the gov.'s fault that we have companies taking risks that they are not financially or technologically capable of dealing with. I would include the banking crises within this catagory also.
 

imagep

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Personally, I'm hoping that this will lead to Congress writing better laws regarding disaster response legislation. I think Congress should write a law stating that businesses involved in a service that could cause massive environmental damage should be forced to work with the Department of Homeland Security and the Environmental Protection Agency in writing up response plans to be pursued in case of such a disaster. Once a response plan between a business and the federal government has been agreed upon, the federal government should investigate these businesses to ensure they have and maintain the assets needed to enact the response plan. These response plans should be up for review every 5 years and updated every 10 years. This way, there's no question or delay in responses to such disasters.

But that idea makes common sense, and doesn't take into account any particular ideologies, agendas, or special interests, which means it probably won't get passed in Congress.

I agree about the hope that this would lead to better laws. I also share your cynicism that the gov will fail to act on what is just common sense.
 

donsutherland1

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In the opening post in this thread, I provided a very broad sketch of the BP accident based on the historic experience. Today, there is an outstanding article in The Washington Post that makes some comparisons between the Exxon-Valdez accident and the BP oil spill. It references the "cutting of corners" that occurred during the Exxon-Valdez accident. It illustrates the human tendency not to learn from historic experience. It highlights how those responsible for risk management overestimated the capabilities of dealing with a major spill.

Some excerpts:

A commission that investigated the Alaska spill found that oil companies cut corners to maximize profits. Systems intended to prevent disaster failed, and no backups were in place. Regulators were too close to the oil industry and approved woefully inadequate accident response and cleanup plans...

The spill "was not an isolated, freak occurrence, but simply one result of policies, habits and practices that for nearly two decades have infused the nation's maritime oil transportation system with increasing levels of risk. The Exxon Valdez was an accident waiting to happen," the report said...

The U.S. Coast Guard and other government agencies proved "utterly incapable" of containing the oil, the commission said. Contingency plans amounted to "toothless tigers," and the equipment shortages and slow responses made a catastrophe inevitable, the report said.


As noted in the opening post, just as had been the case with the Exxon-Valdez spill, the kind of accident that occurred in the Gulf of Mexico was not unforeseeable. It should have been foreseen. Attention to industry trends--namely the push to expand the frontiers of drilling--and historic experience concerning accidents suggested that some kind of major accident was likely and , if the past was representative, preparation for such accidents was typically lagging. Hence, asking what would happen if a "blowout preventer" failed is a question that should have been raised. Given that oil well blowouts have occurred in the past e.g., there was a significant blowout in the North Sea back in April 1977 (for which human error was cited following the investigation into the accident), the issues concerning the impact and response for a blowout in deepwater is something that should have been raised.

Such questions would have led to a dual strategy aimed at (1) risk mitigation and (2) accident planning. One approach to risk-reduction would have been redundancy. Unfortunately, under a crude understanding of efficiency, redundancy is viewed as "inefficient." In fact, such an understanding of efficiency is badly flawed. It is a simplistic "one-size-fits-all" outlook that has little relevance to risk management or general operations. In principle, when an organization is engaged in an activity or business that presents the risk of a major or catastrophic accident, redundancy aimed at reducing that risk makes eminent sense. Under such circumstances, redundancy is a good investment in risk mitigation. It is not inefficiency.

Accident preparation would have led to scenario planning, simulations and war-gaming, among other practices. Such work might well have led to a better capability for addressing such an accident.
 

donsutherland1

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With respect to the point about potential innovation discussed at the beginning of this thread, The New York Times noted that disasters can "spur innovation." The newspaper reported:

Disaster, in short, can become a spur to innovation.

There is no question that the trial-and-error process of building machines and industries has, over the centuries, resulted in the loss of much blood and many thousands of lives. It is not that failure is desirable, or that anyone hopes for or aims for a disaster. But failures, sometimes appalling, are inevitable, and given this fact, engineers say it pays to make good use of them to prevent future mistakes.

The result is that the technological feats that define the modern world are sometimes the result of events that some might wish to forget....
 

donsutherland1

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With respect what could be gleaned from the historic experience, another point that was noted at the beginning of this thread was it is plausible that at least some of the major oil companies could seek to pool knowledge/expertise and collaborate on developing a common response to deepwater accidents. Tonight, CNN reported:

Four leading energy companies announced a plan Wednesday to create a "rapid response system" to deal with any future oil spills in the Gulf of Mexico...

The system, which is still being developed, will be designed to use "capture vessels" to contain and store oil in the event of an underwater well blowout. It will be able to operate at depths up to 10,000 feet, and have initial capacity to contain 100,000 barrels per day.
 

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The oil rupture within the gulf is due to lack of government regulation

No it is due TO government regulation. BP is so well backed by the government that they have no need to respond appropriately to market forces. Under Bush a bill was signed that essentially said oil companies are only liable for 75 million in damages if they mess something up. This along with a lot of other government backing, nowdays the oil companies lack the ability to FAIL. They can be punished, but the fact that everything they do has minimal risk relative to if they didn't have any government support, they can be lax when it comes to safety and responsiblity. If oil companies had to face the same risks most companies face, they'd be a lot more careful. Beyond that, when government comes in it always makes things worse, as oil companies would end up just needing to meet certain requirements and quotas, inefficiently jumping through hoops while not being able to focus on safely drilling oil for the world.
 

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@ DonSutherland1 -- This is, by far, the most intelligent post I've read on Debate Politics. No, let me say it another way. This is the most intelligent essay I've read on the oil spill. Period. I've marked it as a favorite to make sure I get your insightful updates.

@ Masonkiller -- It's probably due to both. BUT any government regulatory agency that didn't foresee this disaster surely wasn't doing its job. I just hope our Nuclear Regulatory Commission makes sure our reactors have contingency plans for accidents. ;-) J/K -- how ridiculous would it be if a power plant had no contingency plan in case all hell broke loose?
 
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