Reports Detail Need For Improvement Of Offshore Drilling Oversight

Houston Chronicle: Congress Has Not Enacted Any “Substantial Proposals Broadly Recommended After The Disaster.” From an April 17 Houston Chronicle article:

In the weeks after the Macondo well blowout, Democrats and Republicans found rare common ground when they agreed that a 21-year-old, $75 million limit on companies' liability for offshore spills was way too low.

But the unity ended there, and now, nearly a year after the disaster, Congress hasn't figured out how to rewrite the federal law that governs who pays what for oil spill damages.

Lawmakers also haven't enacted legislation that would dedicate civil oil spill penalty money to Gulf Coast restoration, boost the time allotted regulators to evaluate offshore drilling plans or any other substantial proposals broadly recommended after the disaster.

[...]

Both the House and Senate held a flurry of hearings in the months after the spill began last April. The Senate Energy Committee approved a bill to overhaul the government's oversight of offshore drilling. And the House passed broad spill-related legislation that would stiffen oversight of offshore drilling, lift the liability cap and tighten standards for wells and emergency equipment.

But the measures stalled last fall amid pre-election politicking and disputes about the liability limit.

Debates about federal spending have dominated the congressional agenda this year. That has mostly crowded out spill-related legislation, save for three measures advancing in the House to accelerate offshore drilling and open more coastal areas for oil and gas exploration.

“Last summer, Congress was actively considering various reforms,” [Natural Resources Defence Council head Frances] Beinecke said. “Now, the most active consideration is to get more drilling.” [Houston Chronicle, 4/17/11]

NY Times: Offshore Drilling Regulator Has Not Yet Established “Robust Regulatory Regime Able To Minimize The Risks.” The New York Times reported on April 17:

A year after BP's Macondo well blew out, killing 11 men and spewing millions of barrels of oil into the Gulf of Mexico, the much-maligned federal agency responsible for policing offshore drilling has been remade, with a tough new director, an awkward new name and a sheaf of stricter safety rules. It is also trying to put some distance between itself and the industry it regulates.

But is it fixed? The simple answer is no. Even those who run the agency formerly known as the Minerals Management Service concede that it will be years before they can establish a robust regulatory regime able to minimize the risks to workers and the environment while still allowing exploration offshore.

[...]

Even the officials who run it, Mr. Salazar and the new director, Michael R. Bromwich, admit that they have a long way to go before government can provide the kind of rigorous oversight demanded by the complex, highly technical and deeply risky business of drilling for oil beneath the sea.

The blowout preventers in use today remain incapable of handling a well rupture of the force of the BP blast. The containment system developed by the industry to respond to another blowout has not been tested in real-life conditions and, by the industry's own estimate, could still allow hundreds of thousands of barrels of oil to spew before a runaway well could be capped.

Mr. Bromwich acknowledged that accident rates for offshore drilling were several times higher in the United States than in Australia, Canada, Norway and the United Kingdom, in part because those countries imposed effective new rules after major accidents. [New York Times, 4/17/11]

AP: Design Flaw In Blowout Preventers Has Not Been Corrected. From an April 14 Associated Press report:

But deep-sea drilling remains highly risky. The effectiveness of the much-touted containment system is being questioned because it hasn't been tested on the sea floor. A design flaw in the blowout preventers widely used across the industry has been identified but not corrected. And regulators are allowing companies to obtain drilling permits before approving their updated oil-spill response plans.

[...]

In a report last month, a firm hired by the government to test the 300-ton device made by Houston-based Cameron and used with BP's ill-fated well said the device failed to pinch the well shut in part because of a design flaw that prevented it from cutting through a drill pipe that had been knocked off center.

Cameron is one of the biggest manufacturers of blowout preventers, so the finding has raised concerns that the devices may have to be overhauled across the board. No design changes have been announced since the finding, and a Cameron vice president defended the integrity of the blowout preventers at a federal hearing this month.

If oil reaches the surface and threatens land, response companies today would still rely on the same equipment and technology that failed to quickly protect land during the BP spill. Floating booms, for example, would still be put in place around sensitive marshes and beaches. [Associated Press, 4/14/11]

Times-Picayune: Oil Spill Commission Recommendations Have “Foundered So Far In Congress.” From an April 10 Times-Picayune article:

A year after the Deepwater Horizon oil disaster, Congress has done virtually nothing to address the issues raised by the oil spill -- from industry liability limits, to regulatory reform, to coastal restoration, to broader issues of energy policy.

[...]

Largely lost have been the recommendations of the National Oil Spill Commission named by President Barack Obama, which called for an overhaul of the government and industry approach to safety, including the creation of an independent safety agency within the Interior Department, a steep increase in the oil spill liability limit, and a big boost in spending for regulation, much of it paid for by fees on industry. This last proposal, embraced by the Obama administration, has foundered so far in Congress. [Times-Picayune, 4/10/11]

Yale's Charles Perrow: “No Evidence” That Industry Has “Marshaled Containment Efforts That Are Sufficient To Deal With Another Major Spill.” The Associated Press reported on April 14:

With everything Big Oil and the government have learned in the year since the Gulf of Mexico disaster, could it happen again? Absolutely, according to an Associated Press examination of the industry and interviews with experts on the perils of deep-sea drilling.

The government has given the OK for oil exploration in treacherously deep waters to resume, saying it is confident such drilling can be done safely. The industry has given similar assurances. But there are still serious questions in some quarters about whether the lessons of the BP oil spill have been applied.

The industry “is ill-prepared at the least,” said Charles Perrow, a Yale University professor specializing in accidents involving high-risk technologies. “I have seen no evidence that they have marshaled containment efforts that are sufficient to deal with another major spill. I don't think they have found ways to change the corporate culture sufficiently to prevent future accidents.” [Associated Press, 4/14/11]

Engineer Robert Bea: No One Has Done Close Analysis Of “Failure Modes” Of Drilling In Unusual And Potentially Risky Offshore Formations. The Washington Post reported on April 16:

“Hope is no strategy for success,” said Robert Bea, a University of California professor who headed a team of industry experts and academics known as the Deepwater Horizon Study Group. “Quite frankly, I think we're scared. The scare is that we'll go off half-cocked, half-prepared, have another significant loss of well control, and that's going to be an industry stopper.”

Bea suggests that not all deep-water prospects should be treated equally. Some geological formations in what Bea calls the “golden zone” of the northern gulf have unusually high pressures, temperatures and gas-to-oil ratios. Combined with brittle rock, these features make the region an extremely tricky place to drill. No one, he said, has done a close analysis of the “failure modes” of drilling into such formations. [Washington Post, 4/16/11]

Leaders Of Oil Spill Commission: “Cutting Corners In The Permitting Process Will Be Counter-Productive For The Industry.” The following statement was released by former Sen. Bob Graham (D-FL) and William Reilly, EPA head under George H.W. Bush, the leaders of the National Commission on the BP oil spill:

“Efficient, expeditious review of permitting decisions for offshore oil development is critical to meet our country's demand for transportation fuels, and that is clearly an objective of the bills under consideration by the House Resources Committee. And yet, as we approach the first anniversary of the BP Macondo oil spill, the worst oil spill in our history, we need to keep front and center that safety along with containment and response capabilities and effective, science-based environmental reviews are imperative if we are to develop the resources responsibly and minimize the risk of another disaster like the one that fouled the Gulf of Mexico, disrupting the region's economy.

”Secretary of the Interior Salazar has taken many important steps to improve his Department's regulatory oversight and we urge Congress, as it considers legislation, to support his initiatives, to provide the necessary appropriations, and to incorporate the findings and recommendations of the BP Deepwater Horizon Oil Spill Commission, which sought to instill respect for safety and careful planning in drilling for oil off our shores. Cutting corners in the permitting process will be counter-productive for the industry, the other stakeholders in the Gulf, and the American people." [The Hill, E2 Wire, 4/14/11]

Republicans Push Bills To Accelerate Drilling Approval. Greenwire reported on April 14:

In a grueling nine-hour markup, the House Natural Resources Committee approved a trio of bills yesterday aimed at increasing production of domestic oil and gas off the nation's coasts.

The advance of bills by Chairman Doc Hastings (R-Wash.) to accelerate and expand offshore drilling in the Gulf of Mexico as well as the Atlantic, Pacific and Arctic oceans is an early victory in the House GOP's “American Energy Initiative.” The proposals could receive House votes as early as next month.

[...]

“Republicans are taking specific action to address rising gasoline prices,” Hastings said after passage of H.R. 1229, which would set two-month deadlines for the Interior Department to act on drilling permits and require the prompt approval of projects halted after the BP spill, among other provisions. “This bill ensures that endless bureaucratic delays and non-answers will no longer be tolerated.” [Greenwire, 4/14/11]

Conservative Media Denounce Offshore Drilling Regulation

Krauthammer Complains About “Bureaucratic Obstacles Stopping The Permits.” From the April 6 edition of Fox News' Special Report with Bret Baier:

CHARLES KRAUTHAMMER: We know what the president's energy policy is -- drill in Brazil and windmills. He was over in Latin America a couple of weeks ago and all enthusiastic for the offshore drilling in Brazil. He is against it here and he has bureaucratic obstacles stopping the permits. He had oil drillers who left the gulf and headed to West Africa. And he says we're going to be a great customer of Brazilian oil, which will be a wonderful addition to our balance of payments deficit. [Fox News, Special Report, 4/6/11, via Nexis]

Kristol: “We Had Cheap Energy From President Reagan Deregulation.” From the March 30 edition of Fox News' Special Report:

BILL KRISTOL, EDITOR, “THE WEEKLY STANDARD”: Not particularly. The demagogic line about how the offshore permit or land allocated on, on- shore, I guess the land in the continental United States for drilling is not used. They need permits to explore.

There is an awful lot of oil and natural gas. I believe if we lift burden as and let people drill we'll have plentiful and cheap energy. That's what we need. It's all about the economic growth. We had cheap energy from President Reagan deregulation for 20, 25 years and good economic growth in the U.S. and around the world. India and China did not make incredible leaps, and that doesn't happen without cheap energy. Let's produce -- there is plenty of natural gas and oil. It needs to be developed and produced. [Fox News, Special Report, 3/30/11, via Nexis]

Fox Business Anchor Complains About “Red Tape” Slowing Oil Drilling. From the April 14 edition of Fox News' The O'Reilly Factor:

CHERYL CASONE, FOX BUSINESS ANCHOR: I just want to give you facts, Laura.

Gas prices have gone up 67 percent since President Obama took office two years ago, and that continues to go up and up. We are most likely looking at $5 a gallon of gas throughout this country, not just in Hawaii and California and New York. But across the country.

Why? Because the president did not take the opportunity that he was given to explore offshore drilling leases. In particular, in the Gulf of Mexico. He backed away from everything. He ran away from the position after the BP Deepwater disaster. And he has not made up for that mistake.

And it was a mistake. Yes, it was a horrible disaster, Laura. But we have the opportunity to drill more at home. We did not take that opportunity. And even oil companies now who are trying to get leases cannot get them because of red tape in the administration. [Fox News, The O'Reilly Factor, 4/14/11, via Nexis]

Donald Lambro: Obama Administration “Strapped The Oil Industry With Suffocating Moratoriums And Industry-Wide Regulations.” From a Human Events commentary by Donald Lambro:

The IMF analysis in its latest World Economic Outlook is music to President Obama's ears because it echoes the “we-are-running-out-of-oil environmental policy that his administration has been peddling to budget-strapped Americans suffering from $4 a gallon gasoline fueled by oil prices that have hit $110 a barrel.

But instead of escalating U.S. development of our vast resources here at home in deep water off-shore oil fields, the Arctic region and elsewhere, his administration has slowed down the pace of drilling permits, and strapped the oil industry with suffocating moratoriums and industry-wide regulations. [Human Events, 4/14/11]

Wash. Examiner: “Only Half A Dozen Permits Have Been Issued.” From an April 7 Washington Examiner editorial:

“There is no magic formula to driving gas prices down,” the president also said Wednesday. Maybe so, but Obama has figured out a pretty good formula for driving gas prices up. Immediately after taking office in 2009, his interior secretary, Ken Salazar, canceled 77 previously approved leases for oil and gas development in Utah. In February 2010, the Environmental Protection Agency mandated that consumers buy 36 billion gallons of renewable fuels (like ethanol) by 2020. By July 2010, the White House banned drilling in the Gulf of Mexico in the wake of the Deepwater Horizon disaster. The ban has since been lifted, but only half a dozen permits have been issued despite hundreds of pending applications. Now the Energy Information Administration projects a 13 percent decline in off-shore oil production this year.

Obama has also banned offshore oil development outside the Gulf for seven years. Salazar has promulgated new rules making it more costly and difficult to develop energy resources on federal land, and the EPA -- while slowing development of a cross-country pipeline that would expand U.S. access to Canadian oil -- is moving forward with a cap-and-trade energy tax program that Congress rejected in 2010. [Washington Examiner, 4/17/11]

Steve Hayes: Short-Term Energy “Solution” Is To Open Outer Continental Shelf, ANWR To Drilling. From the April 6 edition of Fox News' Special Report with Bret Baier:

HAYES: Yes. There is a pretty easy solution, actually. It's opening up the outer continental shelf for drilling, exploration of ANWR. There are things put forth in legislation by member of both party for that address the short-term energy needs.

The administration I think faces real political problems because of the perception that the president is out, you know, talking up the windmills. He is taking test drives in a Chevy Volt. He is doing all of these things that seem to show his disconnect with what is actually happening with oil prices. [Fox News, Special Report, 4/6/11, via Nexis]

Expansion Of Domestic Drilling Would Not Solve High Gasoline Prices

AEI Scholar: “We Probably Couldn't Produce Enough To Affect The World Price Of Oil.” According to a Greenwire article published by the New York Times:

If gas prices keep increasing, Republicans probably will make a push on increased fossil fuel production, said Ken Green, resident scholar with the American Enterprise Institute think tank.

[...]

But experts disagreed about how much impact additional drilling could have. Crude oil is a global commodity, Green said.

“The world price is the world price,” Green said. “Even if we were producing 100 percent of our oil,” he said, if prices increase because of a shortage in China or India, “our price would go up to the same thing.

”We probably couldn't produce enough to affect the world price of oil," Green added. “People don't understand that.”

U.S. production could be negated by decisions that the Organization of Petroleum Exporting Countries makes, said Philip Verleger Jr., energy economist, and David Mitchell EnCana, professor of management, at the University of Calgary's business school.

“Suppose the U.S. were to boost production 1 million barrels a day,” Verleger said. “OPEC has the capacity to cut 1 million barrels.”

The oil industry has been able to convince people there is a connection between U.S. drilling and prices, Verleger said. [Greenwire, 1/4/11]

Lou Crandall: “Gasoline Prices At The Pump Would Be Higher” Even If U.S. Had Increased Drilling. Lou Crandall, chief economist of Wrightson ICAP LLC, an independent research firm that analyzes high-frequency economic data, told Media Matters via email:

Higher oil prices today are a global phenomenon, and the additional supply from increased drilling by the U.S. would not alter the global balance of supply and demand greatly. Gasoline prices at the pump would be higher either way. The only difference is that a somewhat larger share of the revenue would accrue to domestic interests (governmental and private) rather than to foreign suppliers. [Email to Media Matters, 3/14/11]

Bush Administration Energy Department: Additional Offshore Drilling “Would Not Have A Significant Impact” On Crude Oil Prices Before 2030. According to a 2007 report by the U.S. Energy Information Administration:

The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher--2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant. [U.S. Department of Energy, Energy Information Administration, accessed 3/7/11]

DOE In 2009: Reinstating Offshore Drilling Ban Increases Prices By Merely 3 Cents Per Gallon in 2030. According to the Department of Energy's 2009 Annual Energy Outlook, limited access to offshore oil drilling in the Pacific, Atlantic and Eastern Gulf of Mexico would lead to “a small increase in world oil prices,” and “the average U.S. price of motor gasoline price is 3 cents per gallon higher” in 2030. [U.S. Department of Energy, Energy Information Administration, accessed 3/08/11]

Newsweek: Oil Prices “Determined By Global Supply And Global Demand.” From a March 31, 2010, Newsweek commentary by Ben Adler:

Oil, you see, is a fungible global commodity. The oil that one drills for in Texas powers a car the same way that oil from Kuwait does. So the price that Texans pay for oil is determined by global supply and global demand, not how much oil is drilled on the Gulf Coast.

In a market economy such as ours, opening an area for drilling does not mean that the U.S. government controls its destination. Shell and Chevron will be perfectly happy to sell their oil to China if Chinese drivers are willing to pay more than Americans. The U.S. could produce exactly as much gasoline as it consumes and it would still feel the effects of, say, a decision by Hugo Chávez or Vladimir Putin to stop selling any oil. If global supply drops precipitously, global prices will rise, and unless we plan on nationalizing the oil industry--a move I doubt either Democrats or Republicans will endorse--the fact that we are drilling for more oil near our shores won't protect us from the price shock. [Newsweek, 3/31/10]