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Why BP Deserves This May 3, 2010

Posted by Jamie Friedland in Offshore Drilling, Politics.
Tags: , , , , , , , , , , , ,

***UPDATE: I have added a new page to this site to let you more easily find the answers to your oil spill questions.  It is the new “2010 oil spill/offshore drilling answers” tab next to the “about me” at the top of each page, or you can click here.***

As BP’s stock rightfully plummeted on account of the horrendous disaster unfolding in the Gulf of Mexico, CEO Tony Hayward said to fellow executives, “What the hell did we do to deserve this?

Since I have been taking the time to answer other questions about the oil spill here, I think I can spare a few minutes to answer dear Tony’s question as well.

BP CEO Tony Hayward doesn’t understand why this is happening to him. Fortunately, it’s pretty simple to explain.

Some might call the blowout that engulfed the Horizon Deepwater rig in flames, killed 11 workers, injured 17 more, and unleashed an entire oil reservoir on the Gulf coast, an act of god.  Instead, I would counter that this is one of the real, now realized, risks of offshore drilling.  But can BP truly be blamed for this catastrophe?  In short, yes.  On account of simple, deliberate negligence.

And it could just as easy have happened, or even happen AGAIN, to any of the big oil companies operating off of our shores right now.

If you have been following the spill coverage, you have probably heard about the “blowout preventer.”  Blowout preventers (BOPs) are giant valve structures that can weigh 500,000 lbs and stand 50 feet tall.  They are bolted in position on the sea floor at the wellhead, where the “riser” pipe to the rig above penetrates the earth en route to the oil reservoir below.  They are full of redundant systems and backups because they are the ultimate failsafe to prevent disasters like the one we are now experiencing.  In the event of a high-pressure situation, they are designed to clamp shut, closing the well to prevent spills and protecting the oil rig above.  The Deepwater Horizon’s BOP failed.

As this story spreads, the oil industry will paint BOP failures as rare.  They are not. The unclassified version of a 1999 government report found that BOP failures are actually fairly common.  There were a staggering 117 BOP failures in just a 2-year period on the outer continental shelf of the U.S. alone.  Think about that: the last line of defense for American coasts failed more than 58 times per year. A 2007 paper from the Minerals Management Service said that there were 39 actual blowouts (not just BOP failures) between 1992 and 2007.  Add another one to both of those tallies.

Knowing that this final failsafe mechanism was imperfect and the multibillion dollar costs of an oil spill, you’d think that oil companies would do everything they could to prevent blowouts.  Instead, Big Oil used their millions of dollars in annual lobbying to FIGHT blowout preventer requirements.

Blowout Preventers are a flawed fail-safe. It is negligent not to employ every measure to improve their function.

BOPs operate on a type of dead-man switch.  The default position is closed.  The valve is only supposed to remain open if it receives a continuous signal from the rig above.  If that signal stops for any reason, the valves are supposed to slam shut.  Simple enough in theory, but as we now know, that doesn’t always happen.

Major oil-producing countries like Brazil and Norway responded to this concern 17 years ago in 1993.  BOPs on offshore wells there are required to have acoustic triggers, which can be used to remotely activate the BOP if everything else has failed.   The U.S. considered requiring remote-controlled shut-off mechanisms several years ago, but the oil industry successfully lobbied against the restriction, citing excessive costs.

Let’s examine their math, shall we?  Acoustic triggers cost an additional $500,000 per rig.  That’s the cost.  Now let’s look at the benefits: the Deepwater Horizon rig will cost $560 million to replace.  On top of that, BP is spending $6 million each day to try to contain spill.  When the oil really reaches the shore, those costs will multiply.  Then there’s the cleanup operation.

Finally, there are the legal battles.  Suits have already been filed and many more will follow.  Overall, Exxon paid $4.3 billion for the Valdez spill, and it should have been much more: the Prince William Sound still has oil on its beaches, and conservatives on the Supreme Court slashed the punitive fines that Exxon ultimately had to pay by 90% in 2008.

It is this last point that explains why oil companies can and do continue with their reckless behavior at the rest of the country’s expense.  Exxon was able to defer payment for its egregious actions for literally decades, and ultimately owed just four days’ profit in damages. That’s not even a slap on the wrist.

If that pisses you off as much as it does me, you will be similarly thrilled to hear this: while BP is obligated to pay for all of the cleanup effort, our nation’s powerful oil lobby succeeded in shielding oil companies from any real legal liability for spills decades ago.

The first jury (before the lengthy appeals process that well-oiled industry lawyers were able to win) awarded Exxon’s victims $287 million in actual damages and $5 billion in punitive damages.  As I said, they ended up paying only about 10% of that and not until decades later.  So what about BP?  Their actual legal liability for damages is capped at $75 million.  That’s right, $75 million.  God bless America.

More on Exxon Valdez and a similarly twisted cost-benefit analysis for single- vs. double- hulled tankers here.

So, in conclusion, BP/Tony: you deserve this because you skimped on safety precautions you knew to be inadequate.  It is an unmitigated tragedy that so many millions of people and countless innocent animal lives will bear the TRUE costs of your failures.  The same way mining safety caught up to Massey Coal last month, drilling safety just caught up to you.  These events shouldn’t be called “accidents.” The term “inevitables” would be far more appropriate.  As long as we continue to allow these industries to determine their own safety standards, the public (and their employees) will continue to pay the price for their reckless gluttony.

This would segue nicely into a diatribe against…erm, discussion of the absurd Citizens United Supreme Court ruling, but there are more pressing concerns at the moment.



1. 2010 Oil Spill Answers (Pt. 2) « The Political Climate - May 4, 2010

[…] also answered why BP is responsible for this spill/explained what blowout preventers are, and, just a few weeks before this all began, I wrote a detailed post explaining why offshore […]

2. Conceivable and Precedented « The Political Climate - May 4, 2010

[…] proven to be woefully inadequate last lines of defense against this sort of disaster.  A U.S. government report found 117 blowout preventer failures in just a 2 year period!  And the oil industry knew this; each data point on that report’s survey was an actual blowout […]

3. “Energy” Bills Drop and Big Oil Plays Doctor « The Political Climate - July 27, 2010

[…] Granted, I have never been pleased by anything these API lobbyists have said, but this is a remarkably bold statement.  We know fully well that current blowout preventer regulations and practices are not up to the job. […]

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