A Katrina For The Oil Industry?

Last week’s explosion and fire on the Deepwater Horizon oil platform in the Gulf of Mexico southeast of New Orleans resulted in the deaths of 11 workers and an oil leak from its well of 1,000 barrels a day. It’s a local disaster and a regrettable technological failure which shows how dangerous and difficult the extraction of offshore oil actually is.

But it’s worse than that.

The Deepwater Horizon spill has produced a slick currently covering 18 square miles in the Gulf of Mexico, and growing. Efforts to cap the spill at its origin using no less than eight remote-controlled vehicles to engage the blowout preventer device at the wellhead and thus stop the oil flow have so far not worked. BP and Transocean, the two firms involved in the Deepwater Horizon project, are now working on two alternative methods to stop the leakage. First is the drilling of a relief well, which would intersect the leaking well and allow for the injection of special heavy fluids to stanch the flow, which is a $100 million, three-month project. BP is also in the process of designing and fabricating a collection device, or dome, which is essentially a large concrete umbrella which would allow for the funnelling of the escaping oil upward to a collection point at the surface. Domes have been successfully used in the past, but not at the depth of this well. New ground would have to be broken and current technology will have to be stretched.

And, of course, it’s the stretching of technology which is ultimately the cause of the accident in the first place. Drilling offshore, a mile under the ocean, is a technological and scientific triumph which rivals space exploration in its difficulty and complexity. Things will go wrong. While the specific cause of the leak is not yet known, the pressure and high temperature of the hydrocarbons being brought to the surface make for significant risk. Natural gas is often mixed in with the crude oil rising to the surface in a well such as the Deepwater Horizon, and a mere spark could touch off a catastrophe.

That said, it’s been 25 years since the oil industry has had a significant disaster like the one currently going on in the Gulf, and more than 40 years since a significant accident on an offshore well occurred. While fatal accidents and occasional minor spills do happen offshore, the safety record of the industry is, all things considered, remarkable. American oil companies are the best in the world at both safety and environmental protection, and the fact that BP currently has some 32 ships and over 1,000 people on site working on the Deepwater Horizon disaster is a testament to their commitment to address the issue. Meanwhile, the current slick is thankfully moving away from the shore according to latest reports and not expected to hit the Louisiana coastline this weekend as originally feared. BP is using five planes, including two C-130 Hercules transports, to drop chemical dispersants on the slick and there are discussions afoot on burning it off so as to keep it from reaching shore.

But all those efforts are not going to be enough to satisfy the Left, and this is why the Deepwater Horizon has the potential to be a much larger disaster than anyone imagines.

The Wall Street Journal has uncovered a letter sent by BP CEO Tony Hayward in which the company joined with others in the energy sector in opposing new safety regulations by the U.S. Minerals Management Service last September. While safety regulations imposed by government bureaucrats have been shown to be dubious guarantors of anything but increased costs, and while the safety record of BP and others in the oil patch have generally improved over time as safety technology and practices developed internally have advanced, the narrative which is sure to escape from this revelation and will certainly blossom at Mary Landrieu’s May 6 Senate hearing will be that rapacious oil barons neglected both the safety of their workers and the state of the environment in pursuit of profits. BP’s first quarter report of $5.6 billion, which is up from $2.4 billion in the first quarter of 2009, is bound to come up – as though it’s a bad thing that the company turned a profit.

Meanwhile, the Deepwater Horizon incident is manna from heaven for the Sierra Club:

We need to move away from dirty, dangerous, and deadly energy sources. We join our colleagues in saying that every day the Senate fails to pass clean energy and climate policy, we put our economy, our national security and our environment at risk. Now is the time to put America back in control of our energy future with comprehensive clean energy and climate legislation. It’s time to finish what we started.

Of course, the economic cataclysm of the Cap-And-Trade bill currently stalled in the Senate thanks to a fit of pique by the unreliable Lindsey Graham (R-SC) is a likely result of the disaster in the Gulf. The President had put offshore exploration, or at least the illusion of it, on the table as an inducement to Republican support of his policy; one wonders whether even that nugget will still be available – particularly in light of the fact that unreliable Florida Gov. Charlie Crist (R/sort of) has now begun to withdraw his support for offshore drilling off the coast of the Sunshine State. A renewed Florida ban on drilling would merely cede to the Cubans, Chinese and Russians the 20 billion barrels of crude in the Southeast Gulf and in all likelihood much more frequent spills, but at least Crist will be able to say he stood for keeping Florida’s beaches clean.

Five years ago, when another disaster befell the Gulf of Mexico, it was bad government policy which turned a natural event into an expensive, embarrassing and deadly catastrophe. All the elements which made Katrina so devastating to New Orleans seem to be combining to revisit the process with the Deepwater Horizon spill – a chance event turned by politicians into the death of an industry and an economic cataclysm for America.

Cooler heads may yet prevail, and the spill might yet be recognized as an unfortunate, yet inevitable, cost of a vital industry. But given the rigid ideology and ruthless opportunism of those in control of Washington, Deepwater Horizon could not have happened at a worse time for the American energy industry.



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