INSIGHT: US BP spill report draws fire from energy sector

13 January 2011 17:18  [Source: ICIS news]

By Joe Kamalick

US panel said BP rig accident was a WASHINGTON (ICIS)--The 400-page US special commission report on the April 2010 BP oil rig disaster and spill has come under sharp attack from the energy industry and has already drawn a sceptical response from key House leaders.

In its wide-ranging policy recommendations, the BP spill commission appointed by President Barack Obama urged a broad range of increased regulatory oversight of offshore drilling by federal, state and local agencies and citizen groups, more detailed and site-specific environmental reviews of proposed development projects, a mandate for at-ready response equipment and pre-tested spill remediation technologies, and higher fees and financial liability standards for drilling companies.

In what may be its most damning and controversial finding, the commission emphasised that the BP accident was clear evidence of a “systemic failure” on the part of the offshore energy sector as a whole.

In delivering the commission’s report, the panel’s two leaders insisted that the entire offshore industry was in large measure responsible for the accident, not just BP and its subcontractors, Halliburton and Transocean.

Bob Graham, former governor of Florida and an 18-year veteran of the US Senate, charged that “on April 20 last year, after a long period of rolling the dice on offshore drilling safety, our luck ran out”.

Along with William Reilly, who was head of the US Environmental Protection Agency (EPA) under President George H W Bush in the late 1980s, Graham is co-chairman of the commission established by President Barack Obama in May last year.

“It was a significant error of management,” Graham said of the Deepwater Horizon accident. “But it was not the fault of one company, rather it was the result of a systemic failure in the oil and gas industry.”

Reilly said that while the proximate cause of the accident was actions or inaction by BP and its subcontractors, the disaster broadly speaking was the result of “inexplicable decisions amid a cult of complacency on the part of both government and the industry”.

“We do know that this is a systemic problem,” Reilly said, adding: “The solution must be industry wide.”

But the commission’s report - and the panel’s members - were quickly challenged by the US energy industry.

“This commission has had problems from the beginning,” said Dan Kish a senior official at the Institute for Energy Research (IER), an energy industry think-tank.

Kish charged that the commission, “full of politicians, activists and opponents of offshore drilling”, “has seemed to prioritise creating political cover for the Obama administration rather than being a fact-finding body”.

Indeed, during his presentation of the commission’s report at a packed press conference in Washington earlier this week, chairman Reilly was at pains to declare that the BP spill “was not President Obama’s Katrina” and that the response to the subsea spill by Environmental Protection Agency (EPA) administrator Lisa Jackson was both prompt and highly professional.

“The spill commission marks a huge missed opportunity for this nation,” Kish added. “They did not tell us what went wrong, opting instead for vague ‘systemic problems’ that ignore decades of success” in Gulf drilling operations.

“Their recommendations seem to further the Obama administration’s approach to oil and gas exploration: do less of it with American workers and import more from foreign countries,” he said.

The American Petroleum Institute (API) similarly found fault with the commission’s blanket condemnation of the entire offshore energy sector.

“API is deeply concerned that the commission’s report casts doubt on an entire industry based on its study of a single incident,” said API upstream director Erik Milito.

Like others in the energy sector, Milito worried that the commission’s report and wide-ranging policy recommendations would serve to further delay the general resumption of offshore exploration and development in US waters of the Gulf of Mexico.

“We hope the administration recognises the improved safety work already done and the need to rapidly restore vibrancy to the nation’s offshore oil and natural gas production programme,” Milito said.

“Both the nation’s energy security and our recovering economy demand it,” he added.

The Independent Petroleum Association of America (IPAA) warned that the “duplicative and overlapping new regulatory agencies - as recommended by the commission - could further delay the thousands of Americans waiting to get back to work in the Gulf region”.

The IPAA, whose mostly small-company members account for 90% of oil and gas wells drilled in the US, further cautioned that the commission’s recommendations could “create an unworkable regulatory framework for our industry, [especially for] smaller independent producers”.

The Consumer Energy Alliance (CEA), a coalition of energy producers and energy-dependent industries such as trucking, also challenged the motives and policy recommendations of the commission.

CEA president David Holt noted that the commission had a mandate “to take a hard look at the facts and produce a set of recommendations aimed at improving the way we access energy offshore - not for the purpose of shutting those activities down”.

“Most notably,” Holt said, “the report includes an entire section questioning whether offshore energy development can take place safely and responsibly in Alaska and Arctic”, ignoring the fact that “such activities have been pursued safely for generations”.

API president Jack Gerard, speaking after the commission report was issued, said that the US has abundant oil and natural gas resources whose development would boost US employment and the economy overall - if not blocked by policymakers.

“Realising the full potential of more oil and gas development for America’s workers is going to take much more cooperation than we currently have on the policy front,” Gerard said.

“More domestic development is low-hanging fruit that can give a major boost to America’s economic recovery,” he said. “But Americans will never realise the full benefits if policymakers keep a lock on the orchard gate.”

An energy industry insider who attended the commission’s press conference said that if the panel’s policy recommendations were to be implemented by the Obama administration, “I wouldn’t be ready to bet that new deepwater drilling will resume in the Gulf within ten years”.

While commission chairmen Reilly and Graham said they thought Congress might well approve many of their recommendations for much more stringent regulation of offshore drilling, that outcome is not at all certain.

Representative Doc Hastings (Republican-Washington), chairman of the House Natural Resources Committee, cautioned that while the commission’s call for increased safety for offshore drilling was welcome, policies that would effectively shut down domestic energy production were not.

“Reforms should accomplish our shared goals of improving safety, allowing drilling to move forward in a timely manner, and putting people back to work,” Hastings said.

“Proposals that prolong the de facto moratorium in the Gulf, cost American jobs, or delay future energy production will be viewed sceptically in both the House and Senate,” he added.

Congressman Ralph Hall (Republican-Texas), chairman of the House Committee on Science, Space and Technology, also welcomed the commission’s report but cautioned against reckless policymaking.

“While government and industry should both continue to improve their management of drilling practices,” Hall said, “it is imperative that we do not recklessly handicap our energy sector.”

“Ensuring that the nation has a safe and productive ‘all of the above’ energy strategy is vital to our competitiveness and economic recovery,” he added.

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Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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