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The Report by the Commission on the BP Accident

January 19, 2011

By Michael Economides and Phil Rae
Posted on Jan. 17, 2011

(see http://www.energytribune.com//articles.cfm/6313/The-Report-by-the-Commission-on-the-BP-Accident)

The federal government released last week its long-awaited report on last April’s BP Deepwater Horizon accident. The Commission charged by President Obama since May with investigating the massive spill coined itself “bi-partisan” — a description it also gave to its conclusions. Regardless of the members’ alleged political bent, Investor’s Business Daily editorial writers note they all hold at least one shared belief:

Considering the commission’s makeup, it was like a panel of vegetarians deciding how to regulate the meatpacking industry. President Obama appointed to the seven-member panel National Resources Defense Council President Frances Beinecke, Union of Concerned Scientists board member Fran Ulmer and five other Democratic donors who have one thing in common — opposition to oil and gas exploration in any shape or form.
Rather than strive for meaningful reforms that would improve the safety of offshore energy production, reinvigorate the Gulf Coast’s economy and further strengthen America’s energy security, the only notable outcome from the report will likely be more government bureaucracy.

This imposition of even more Washington red-tape fails America generally, and her consumers and businesses specifically, in four key areas.

First, the commission’s conclusions fail to acknowledge just how integral energy is to America’s economy. When it comes to employment in this difficult job market, the numbers speak for themselves. Here in the Gulf, the offshore oil and natural gas industry directly employs about 150,000 people. The U.S. oil and natural gas industry as a whole provides more than 9.2 million jobs. And conventional energy is of great import to a wide variety of other industries, such as agriculture, where over 2.2 million farmers depend on oil and natural gas for fuel and fertilizer.

Moreover, as PricewaterhouseCoopers has pointed out, America’s oil and natural gas industry contributes more than 7.5 percent to our gross domestic product (GDP). Yet nowhere in the national commission’s 381-page report are these numbers mentioned, let alone rightfully emphasized.

Second, offshore is the main area where there are both massive quantities of hydrocarbons and where America’s world-leading petroleum technology can be deployed best. Again, this presents a case of more bureaucracy versus the facts. As CNN.com reporter Steve Hargreaves writes, “worldwide deepwater oil production is surging, driven by high prices, new technology, and dwindling prospects on land.” But this new production is occurring off the shores of places like Angola, Brazil and Malaysia, not America. The most painful irony is this: Offshore petroleum technology is perhaps the most American of all technologies in the world.

Looking forward, the robust production of offshore energy becomes even more apparent. In fact, IHS Cambridge Energy Research Associates (CERA) estimates that production via deepwater drilling will double between now and 2020, when it will then be responsible for meeting 10 percent of global demand. Alas, the new agencies and regulations proposed by the commission will restrict America’s participation in this growth.

Third, President Obama’s commissioners conveniently forgot that oil and natural gas will continue to dominate America’s energy landscape for decades, most likely the entire 21st century. The U.S. Energy Information Administration’s (EIA) notes in its 2010 projections to 2035 that, “offshore natural gas, the bulk of which is from deep waters in the Gulf of Mexico, contributes significantly to domestic supply.” This is coupled with the fact that oil and natural gas alone currently meet 62 percent of America’s energy demand — a reality not likely change to anytime soon.

In typical bureaucratic fashion, this BP spill report fails to address what Americans actually need now and in the future, namely accessible and affordable energy.

Not surprisingly, despite its professed lofty intentions, this report will not help protect against similar events in the future. Because no member of the Commission was qualified to critically look at the technical issues, the report perpetuates various inaccurate assumptions and erroneous conclusions regarding how the blowout was initiated. In a recent report, “Genesis of the Deepwater Horizon Blowout”, we discussed the key factors that determined the evolution of the BP well catastrophe. We identified numerous rig problems and crucial steps that confused the crew and caused misinterpretation of a critical test of well integrity. A simple phone call to check those results would almost certainly have avoided catastrophe.

While it is clear that mistakes were made in the final stages of the Macondo well, numerous factors conspired that day aboard the Deepwater Horizon and caused the problems that ultimately led to the blowout, with both human error and mechanical failure playing a part. Better training and tighter supervision of critical operations are the means to address such challenges, not new government regulations. More than 14,000 deepwater wells have been successfully drilled across the world, underlining the rigorous industry standards which made that success possible. Broad conclusions about the industry as a whole cannot and should not be drawn from this one event.

Though the commission’s conclusions and accompanying recommendations will not prevent future accidents, the grandiose goals set forth are almost certain to add more delays, more burdensome regulation, and higher costs for businesses and consumers.

As Will Rogers once said, “I don’t make jokes. I just watch the government and report the facts.” America’s energy and economic prosperity is the last thing we should joke about.

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