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DEEP WATER: The Gulf Oil Disaster and the Future of Offshore Drilling

Posted by Content Coordinator on Monday, January 10th, 2011


Lessons Learned: Industry, Government, Energy Policy

The private oil and gas industry is the lead actor in exploration and production of Gulf energy resources. In the wake of the BP Deepwater Horizon disaster—a crisis that was unanticipated, on a scale for which companies had not prepared to respond—changes in safety and environmental practices, safety training, drilling technology, containment and clean-up technology, preparedness, corporate culture, and management behavior will be required if deepwater energy operations are to be pursued in the Gulf—or elsewhere. Maintaining the public trust and earning the privilege of drilling on the outer continental shelf requires no less. As Chapter 8 explains, some of the required responses are under way; for other measures, there are useful precedents from other industries. Beyond the oil and gas industry’s response, the inadequacies in permitting and regulatory standards, practices, and oversight revealed by the crisis have already caused significant changes in the federal rules and procedures for deepwater drilling. But further action, including the creation of an independent safety authority, is clearly warranted, as described in Chapter 9.

Finally, the interplay of public incentives, security considerations, energy conservation and use, and alternative energy sources, among other factors, will shape future deepwater drilling in the Gulf and in other frontier areas, as discussed in Chapter 10. Because some of those frontiers are defined by greater well depths and pressures, and others are in settings as yet untapped (the Arctic, in particular)—with economies, environmental resources, and community characteristics different from those tested so severely in and along the Gulf Coast— learning the right lessons from the BP Deepwater Horizon, and adapting them to different contexts, must thoroughly inform the future of America’s offshore oil policy.

Changing Business as Usual

The Deepwater Horizon blowout, explosion, and oil spill did not have to happen. Previous chapters have explained the immediate and root causes for why they nonetheless did. The American public, government, and the oil and gas industry need to understand what went wrong so they can pursue the changes required to prevent such devastating accidents from recurring.

This chapter examines how petroleum companies have been managing the risks associated with finding and producing oil and how they can do it better, individually and as a responsible industry overall. The record shows that without effective government oversight, the offshore oil and gas industry will not adequately reduce the risk of accidents, nor prepare effectively to respond in emergencies. However, government oversight, alone, cannot reduce those risks to the full extent possible. Government oversight (see Chapter 9) must be accompanied by the oil and gas industry’s internal reinvention: sweeping reforms that accomplish no less than a fundamental transformation of its safety culture. Only through such a demonstrated transformation will industry—in the aftermath of the Deepwater Horizon disaster—truly earn the privilege of access to the nation’s energy resources located on federal properties.

Offshore oil and gas exploration and production are risky. But even the most inherently risky industry can be made much safer, given the right incentives and disciplined systems, sustained by committed leadership and effective training. The critical common element is an unwavering commitment to safety at the top of an organization: the CEO and board of directors must create the culture and establish the conditions under which everyone in a company shares responsibility for maintaining a relentless focus on preventing accidents. Likewise, for the entire industry, leadership needs to come from the CEOs collectively, who can apply pressure on their peers to enhance performance.

Properly managed, the presence of risk does not mean that accidents have to happen. As Magne Ognedal, Director General of Norway’s Petroleum Safety Authority, put it: “risk must be managed at every level and in every company involved in this business. . . . In this way, risk in the petroleum sector can be kept at a level society is willing to accept. And we can reduce the probability that major accidents will hit us again.”

The Challenge of Change

Changing institutional culture and behavior is rarely easy. Business interests naturally prefer stable laws and market conditions that allow planning and investments (which can run into the billions of dollars for extensive deepwater operations in the Gulf) based on a clear understanding of what the future holds. But in the aftermath of the Deepwater Horizon spill, the operating environment and legal regime have been in constant flux. Beginning with a drilling moratorium, the industry has been struggling since the spring to recover from the nation’s loss of trust in the safety of its operations, especially in the deepwater Gulf.

The oil and gas industry needs now to regain that trust, but doing so will require it to take bold action to make clear that business will no longer be conducted as usual in the Gulf. Industry must seize the opportunity to demonstrate that it is fully committed to subjecting its own internal operations to fundamental change and not merely because it is being forced to do so. Underscoring the sincerity and depth of their commitment to embracing a new safety culture, company leaders will need to lead the effort to guarantee that risk management improves throughout the industry to ensure that the mistakes made at the Macondo well are not repeated. And those leaders must also demonstrate an equal commitment to ensuring adequate containment and response technology and resources in case another spill happens. Only then will the oil and gas industry truly demonstrate that it is ready, willing, and able to engage in the kind of responsible offshore drilling practices upon which the nation’s basic energy supplies depend.

Mecando Well Schematic

Download full report (PDF): DEEP WATER

About the National Commission on the BP Deepwater Horizon Oilspill and Offshore Drilling
President Barack Obama established the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling through Executive Order 13543 on May 21, 2010. The Commission will be examining the relevant facts and circumstances concerning the root causes of the Deepwater Horizon explosion and developing options to guard against, and mitigate the impact of, any oil spills associated with offshore drilling in the future. This may include recommending improvements to federal laws, regulations, and industry practices

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