presentation (oil spil)

8/8/2019 Presentation (Oil Spil)

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All BP has to do is appear to make an effort to control the spill. If they never control it, what does it cost them? That's why the government will have to get involved, unfortunately. Corporations own our government, which means no onein the government will force BP to pay for the damages. Purchasing senators certainly pays for the big boys.

BP Oil Spill: A Fuller Picture

BP's sub-contracted Deepwater Horizon oil rig ² a 30-story, fifth-generation, ultra-deepwater, dynamically-positioned, column-stabilized, floating, semi-submersible DrillingUnit ² exploded on April 20th and sank two days later, unleashing a gushing discharge of oil into the Gulf of Mexico that promises to upset the ecological stability of a vast region for years.

This devastating oil spill is a great industrial disaster with widespread negative effects for both the environment and those who live, work and play in the impacted areas. And wemourn the loss of those who died in the explosion.

This crisis is far from over, but we can take steps now to examine the accident and our responses to it. If we are to have any assurance that a catastrophe of this kind and degreeis not repeated, we need to have a clear-eyed and unflinching view of all of the contributingfactors involved.

HAZARDOUS ECONOMIC ENVIRONMENT

Oil companies like BP are protected by a $75M cap on damages put in place by an act of Congress in the Oil Pollution Act of 1990. After the Exxon-Valdez disaster (1989) had beencleaned up and nearly paid for by Exxon, oil companies lobbied Congress for liability limits

that would establish a maximum amount they would have to pay in the event of a disaster. A Republican Congress and President Bill Clinton together enacted law requiring that oilcompanies be limited to paying $75M for cleanups, leaving the taxpayer with any remainingcosts. In return for this legislative favor, the government could now tell the oil companieswhere they could or could not drill.



BP entered into an agreement with the state of Louisiana to drill in 500 foot waters off their coast. But the federal government superseded that agreement and told BP that it could onlydrill farther out in much greater depths; where no well had ever been broken and under conditions the government had never before monitored. And for this dangerous adventure,BP would only need allocate $75M toward any possible mishap. In the case of an oilcompany worth hundreds of billions of dollars, a $75M cap, well below the $14 billionestimated for the cleanup, amounts to a corporate bailout. BP, by the way, presently earnsroughly $6 billion per quarter.

The liability cap is, at bottom, an instance of private enterprise -- Big Oil -- successfully

lobbying the power of government to gain undeserved market advantages. Thisgovernment-granted advantage becomes an incentive to hazard short cuts, hide secretproblems and cozy up to willing regulators for further advantage. It is a perverse incentivebased on the secure knowledge that no matter what the extent of an incident, BP wouldeasily survive to mark down the relatively minor financial loss as a ledger entry under ³TheCost of Doing Business.´

Without such a forgiving cap, BP would be forced into the position of having to rigorouslyassess the risks of drilling in dangerous, relatively inaccessible 5,000 foot deep waters andpossibly suffer the actual cost of a potentially uncontrollable and financially devastating spill.

The ruptured well at the bottom of the sea is so deep underwater that no one can physically

get to it because of the intense pressure and freezing cold. This inaccessibility is a factor inthe several failed attempts to stop the spill using robotic submersibles. Had BP beenallowed to drill on land or in more shallow waters currently off-limits, a similar accidentwould have been manageable and remedied in short order . Environmentalists should askthat bans on drilling in lower risk areas like ANWR and the shallow-water continental shelf be rescinded. Today, we are drilling in high risk areas because cheaper, less risky sourcesof oil have been deemed off limits.



HAZARDOUS BUREAUCRATIC ENVIRONMENT

The federal government regulates off-shore drilling. The entity charged with setting safetyguidelines, conducting safety inspections and enforcing safety regulations is the MineralsManagement Service (MMS), an Executive Branch agency under the Department of theInterior.

This agency is notorious for its corruption and incompetence and begging for a shakeup.MMS had never required any of the critical backup systems -- the deadman, the autoshear,the underwater robots -- to be tested and many of the cost-cutting measures adopted byBP, and condemned by its critics, were approved by the agency charged with oversight.

A regulatory rule was ignored requiring oil companies to submit proof-positive that any blindshear rams in use would actually shear pipe and seal a well 5,000 feet down. MMS went onthen to approved BP¶s Macondo Prospect permit without requiring this proof. MMS has infact approved hundreds of permits without requiring this proof and BP claims that no suchproof was ever requested of them. MMS commissioned a study by the Scandinavian

SINTEF Group that documented over 100 failures of blow out preventers. The groupformally recommended a redundant system saying, "All subsea B.O.P. stacks used for deepwater drilling should be equipped with two blind shear rams." MMS did not incorporatethis recommendation into their regulatory regime.

Rounding out the scandal, MMS staff were perpetually being found in compromisingpositions. Tim Dickinson reports in Rolling Stone magazine:

³When agency staffers weren't joining industry employees for coke parties or trips tocorporate ski chalets, they were having sex with oil-company officials. But it was Americantaxpayers and the environment that were getting screwed. MMS managers were awardedcash bonuses for pushing through risky offshore leases, auditors were ordered not to

investigate shady deals, and safety staffers routinely accepted gifts from the industry,allegedly even allowing oil companies to fill in their own inspection reports in pencil beforetracing over them in pen.´

Far from being out of the loop, BP told MMS on Feb. 13th that it was trying to seal cracks inthe well about 40 miles off the Louisiana coast. MMS was also well aware of risk factorsconnected to the failed blowout preventer. An investigation by The New York Times revealed that:

"MMS repeatedly declined to act on advice from its own experts on how it could minimizethe risk of a blind shear ram failure in the blowout preventer. It also shows that the Obama

administration failed to grapple with either the well-known weaknesses of blowoutpreventers or the sufficiency of the nation¶s drilling regulations even as it made plans thisspring to expand offshore oil exploration."

The government has also failed us in a number of ways since the spill. What the ExecutiveBranch should have done early on, but did not, was review the plans for coping with thedisaster and intervene decisively to move crusty bureaucracy in flexible and responsivedirections. Instead, we have seen classic bureaucratic stalling, obstruction and confusion.



In one case, the implementation of plans to dredge and build sand berms along thecoastline in effected states has been held up the U.S. Army Corps of Engineers, the agencythat must approve these plans, because the barriers may impede natural water flows.

In another case, the Obama administration declined a Dutch offer to aid in the clean uppartly because of the pro-union, protectionist Jones Act, which restricts foreign-built andforeign-staffed sea craft from operating in U.S. waters. The Bush Administration waived theJones Act to help with relief efforts in the wake of Hurricane Katrina and Hurricane Rita. TheObama Administration should do the same and, to date, has not. The Dutch offered to flytheir skimmer arm systems to the Gulf three days after the oil spill started. The offer wasapparently turned down because EPA regulations do not allow water with oil to be pumpedback into the ocean. But if all the oily water was retained in the tanker, the capacity of thesystem would be greatly reduced because most of what is pumped into the tanker is seawater.

It is also perplexing that only 20 America's 2,000 skimming barges are being deployed inthe Gulf on the off chance that the other barges might be needed for oil spills elsewhere.

These few vessels performing cleanup operations off Louisiana were halted for 24 hourswhile the U.S. Coast Guard fulfilled its regulatory function of inspecting them for fireextinguishers, life vests, etc.

Alabama Governor Riley complained that there is no single person in charge. Both GoldCoast governors have developed plans with the Coast Guard's command center, but thoseplans were frustrated when agencies like the Environmental Protection Agency and the U.S.Fish and Wildlife Service asserted themselves. Says Riley, "It's like this huge committeedown there and [for] every decision that we try to implement, any one person on thatcommittee has absolute veto power." For example, the EPA has repeatedly changed itsmind regarding the chemical dispersants that Louisiana is allowed to use.

UNHELPFUL SOLUTIONS

Some of the cleanup methods being employed are actually very harmful to people, theenvironment and marine life. More so than oil. Oil naturally breaks down in sea water over time through weathering, feasting micro-organisms, and solar decomposition. Oil is acommon, natural presence in the environment, including in the Gulf of Mexico. A 2009article in Environmental Science and Technology reported that the naturally occurring CoalOil Point seep field off the coast of Santa Barbara has leaked up to 200 barrels of oil into



the ocean every day for perhaps thousands of years. Yet marine organisms still prosper there.

In response to the Gulf spill, toxic dispersants like Corexit (banned in Europe) are beingused. Dispersants don't clean, they disperse. They prevent oil from rising to the surface of the water which limits its exposure to nature's cleansing agent: the Sun. Keeping oil belowthe surface with dispersants hampers the natural process of decomposition. The warmer the water and the greater the solar exposure, the faster oil breaks down. One gallon of aCorexit and oil mixture is capable of rendering 383,141 gallons of water highly toxic to fish.

And BP has ordered another 805,000 gallons of these type dispersants to dump into theGulf.

There is, though, one proven technique that has been used to quickly stop deep water oilleaks: a controlled nuclear detonation. This technique has quickly and permanently stoppedoil leaks in 4 out of 5 attempts by Russia in the 1960¶s and 1970¶s. The US government canauthorize such an option.

UNHELPFUL REACTIONS

The Executive Branch has proposed a controversial six-month moratorium on offshoredrilling against the advice of experts. The result would be that, after an international biddingwar, the best and safest rigs would be redeployed elsewhere in the world to satisfy worlddemand and leave the U.S. with the oldest, least desirable and least safe rigs. This wouldsimply increase the probability of another major disaster. An arbitrary six-month moratoriumon new deep-water drilling would further damage the already faltering economies of the Gulf states and could result in the loss of 20,000 oil industry jobs. The drilling industry estimatesthe moratorium would cost rig workers as much as $330 million per month in wages. Andthis does not take into account businesses serving those rigs, like machine-shop workers.

Making matters worse, the White House is engaged in a cynical, politically-motivated publicrelations campaign that would dishonestly lay all of the blame on private enterprise toobscure its own culpability. This indignant kabuki dance has helped to fuel a general anti-business hostility in the nation that is inciting consumers and activists to target smallbusiness-people who own BP gas station franchises for boycotts and vandalism. Attackingand boycotting these small businesses has no impact on BP. The majority of BP stationsare privately-owned. Instead, these actions only hurt local business and the low-skilledemployees they hire. And much of the gasoline sold at BP gas stations comes from other sources. No practical good can come of grandstanding and demonizing BP. No amount of bullying, boasting, threatening, or emoting will solve a complex technical problem.

Leveraging the hostility it has fueled, the government now demands that it should take over the claims payment process by appropriating financial assets for disbursement to injuredparties on its own terms. First of all, the government does not have a good track record of efficiency in handing out aid to disaster victims -- or, in some cases, non-victims. Andhaving the government disburse claims money gives the illusion that the government issolving the problem when it has only seized assets to distribute according to politicalcalculation.



The compensation process is the proper function, first, of the private sector and, second,the judicial system. Instead, the White House is expropriating vast sums of money from aprivate enterprise to distribute to whomever it deems worthy of compensation. That isprecisely what is happening with the $20 billion shakedown of BP to compensate peopleallegedly harmed by the spill. This should guarantee a steady stream of claimants androoms full of indifferent bureaucrats and attorneys. The takeover of the claims process alsofosters the illusion that politicians are doing something, diverting attention from their ownculpability.

Further exacerbating the problem has been the two-month-long partisan media blackout of the government's obstructions and incompetence before and after the spill. Faking realitydoes not change it. And the media have once again failed to perform its watchdog function.

LIMITED GOVERNMENT

The proper role of government in a free society is limited; that is, limited to the protection of individual rights within a framework of objective law. The government should and must

protect individuals from violence, fraud and willful negligence.

The federal government owns the property where BP and other oil companies drill for oil inthe Gulf of Mexico and has an obligation to ensure its proper and safe use. This shouldinclude ensuring that no action take place on that property that would egregiously pollutethe common environment or endanger the lives and livelihoods of the people there. Aproperty owner has both rights and responsibilities in this respect and must take pains toavoid causing harm.

All property owners should regulate; that is, control or direct by rule, principle or method theuses to which their property is put. You may apply a rule in your own home that admits nohandguns and all guests must comply. The federal government may likewise set rulesregarding what types of activity take place on its property and parties to lease agreementsmust comply. In the case of the homeowner, a simple acknowledgment may suffice. In thecase of complex and dangerous deep-sea oil exploration, rigorous standards, inspectionsand enforcement actions are necessary. In both cases, transparency on the part of theguest is required.

Any breach of established rules should be met with impartial enforcement for the benefit of the innocent. As it is, the Interior Department, through MMS, holds the keys to access tooffshore drilling. It is through government dereliction, corruption and graft that BP receivesunfair advantages in the marketplace.

SUGGESTIONS

What needs to be addressed is a legal and policy framework that encourages and rewardsmisconduct on the part of Big Oil.

Total liability: Government-imposed liability caps should be removed to expose oilcompanies to the actual cost of damages in the event of an incident. In this way, self-interest begets compliance. Oil companies that would like to make money instead of lose it



will take extreme measures to avoid the consequences of bankruptcy. It is the artificialremoval of risk through government intervention that introduces hazard into the equation byfalsifying reality. Capping liabilities does not eliminate real damage. It simply transfers thereal costs from the guilty to the innocent.

Insurance: Rather than relying on corrupt and incompetent government bureaucrats topolice risk, oil companies should submit to the oversight of insurance companies who standto lose a great deal in cases of negligence or other bad behavior. An insurer would certainlyrequire the oil company to put up a substantial performance bond as a safeguard against abreach of contract. And if the oil company is held fully liable for damages, they would befoolish not to take out policies that match their exposure.

Prosecution: The government must fulfill its proper role of protecting rights and conduct athorough and objective investigation into the accident to determine if and where any criminalnegligence might have occurred.

Adjudication: The courts should vigorously fulfill its role of redressing grievance by quickly

and appropriately processing injury claims based on merit. Litigation is the purview of government. If litigation in this case becomes dragged out to the detriment of the actuallyinjured, then this would be yet another example of the failure of government, not the privatesector.

Non-intervention: Government needs to get out of the habit of handing out favors based onpolitical calculation and personal aggrandizement. It is government intervention in theeconomy that creates lobbyists, corporatism and special interest groups who act rationallyin their own interest in an un-free market. Corporations and special interest groups can onlybuy government favors when government is for sale.

GOING FORWARD

We ought to acknowledge that oil has brought us a many life-enhancing, wealth-producing,comfort-creating advancements over the past hundred years or so and it remains anessential element in our lives. Not only does oil fuel the automobiles, freighters, jets, trucks,and industrial machinery that power our global economy, its derivatives are found in hospitalproducts that ensure our health: durable, flexible plastic (oil) tubes that safely deliveredfood, coming from a sealed plastic (oil) bag that securely stores it; oil tubes designed tovacuum excess fluids; disposable foam (oil) cradles to prop up the patient¶s arms or legs if necessary±made of oil so as to be disposable; disposable, sterile gloves are either latex or synthetic±that is, made of oil; disposable surgical masks and head-coverings; sanitaryplastic (oil) trash-bags for medical waste. Infection in the hospital operating rooms used to

be a highly-common and deadly product of surgery due to a lack of petroleum products.

There is also mounting evidence that oil is abiotic in origin; that is, not derived from fossils.Meaning that oil may well be a renewable resource generated from deep withing the Earth'scrust that can serve mankind's needs indefinitely without reaching any mythical or hoped-for peak. There is no viable alternative to oil on the horizon and we should continue to findways to safely and cheaply extract it for our use.



And there is no use in disparaging our use of a valuable resource by characterizing it as an³addiction.´ We are no more ³addicted´ to oil than we were ³addicted´ to wood two hundredyears ago for warmth or sailing ships. We "use" oil and its derivatives for many good thingsthat make life agreeable and would be hard-pressed to do without it.

I hope the spill is stopped and the Gulf waters cleaned up as soon as possible. But I alsohope that the oil already spilled can be salvaged for consumption to our benefit. If we are tocontinue are present lifestyles of prosperity, convenience and health, we will need to pursuethe values of civilization and that includes continuing to explore for oil. Let's make sure wedo it properly and avoid the many mistakes that went into causing our current crisis in theGulf.

While BP is ultimately responsible for the spill ± and for cleaning it up ± the federalgovernment is implicated in many significant ways as well. A lot of people have been callingfor BP to be held to account, and they should be. But a fuller accounting will be one thatincludes all of the perpetrators and their degree of culpability. In that case, for all of itsfailures, the federal government must be placed in the docket as well.

The first reaction of the seasoned politician to any catastrophe is, in the hope of deflecting any personal blame, to identify scapegoats and machine-gun them down. For President Barack Obama, the main culprits in the Deepwater Horizon disaster are already clear ± they are BP, theBrits in general, and the "drill-baby-drill" policies of the previous administration.

At no point does it seem to have occurred to him that the underlying cause is rather closer tohome; the environmental ruin now being visited on the Gulf of Mexico is not primarily aboutsafety failures at BP, still less is it about lax regulation. Rather it is to do with America'sinsatiable appetite for oil.

America is far and away the biggest consumer of oil in the world. Per capita consumption of energy in the US is nearly five times higher than the global average, and despite progressive off-shoring of energy-intensive industry, there's little sign of it easing. American lifestyles burn anawful lot of energy.

I make no moral judgment on this; it's just the way it is. But whereas US consumption of oil isaround 21 million barrels a day, domestic production is just 6 million. The bottom line is thatAmerican demand for secure, domestically produced oil requires drilling in ever moreinhospitable, dangerous and environmentally sensitive areas that tests the boundaries of established technologies. "Energy independence", free from reliance on foreign supplies, is oneof the holy grails of American policymakers. Yet, as the Gulf oil spill has demonstrated, it comes

at a price.

President Obama has halted further deep-water development ± this less than two months after sanctioning a new swathe of offshore acreage to address energy security concerns.

Unfortunately, energy production works on the water bed principle. Squeeze it down in one areaand demand ensures that it merely rises up somewhere else. If greater shale development is theanswer to America's energy security needs, it seems scarcely less likely to be environmentally



benign than deep-water drilling in the Gulf of Mexico. The damage is merely transferred fromthe beaches of Louisiana to the mountains of West Virginia.

Mr Cameron promises less intervention in the British economy, but more activism to correct thefailures of the past and ensure more balanced economic development. I'm not sure I entirely

understand the distinction, but if he means a return to the corporate state after the mishaps of free-market orthodoxy, we've tried that too and it didn't work.

Almost 40 days ago, while the Obama administration advocated offshore drilling to reduce our dependency on foreign oil, BP¶s oil exploration resulted in the worst ecological disaster indecades, and maybe even the worst ever in our hemisphere. The oil spill is about the size of Rhode Island, running across the northern Gulf of Mexico between the mouth of the MississippiRiver and Florida. It runs wide, threatening the coastlines, and deep, traveling beneath about5,000 feet of water and 13,000 feet under the seabed. The deepwater well is leakingapproximately 5,000 barrels per day, shutting down fishing across the affected areas, damagingfragile habitats and putting wildlife in peril. Philippe Cousteau Jr, the most recognized expert in

Oceanography called the Gulf Spill an ³underwater nightmare´ which will be felt in the Gulf region for decades.

The world witnessed BP¶s failure to contain the damage and is now asking: What shouldgovernment do? Should government punish the industry with tougher regulations? Shouldgovernment step in and attempt to clean up the Gulf region and ³bailout´ BP by using taxpayersmoney to clean up the oil mess?

Let me suggest something to those who are advocating government intervention: If the oilindustry experts at BP are incapable of finding a solution, what makes you think that the federalgovernment has all the answers? Government intervention to clean up the Gulf will simply be

another bailout paid for by taxpayers. How can we punish BP sufficiently so that this kind of negligence never happens again? my answer: the competitive free market is doing a goodenough job at punishing BP! («and the future lawsuits that will come as a result)

BP is losing millions of dollars everyday attempting to contain the oil spill and as if that was notenough, the company stock has suffered in comparison to others in the industry. BP¶s shares aredown from over $60 right before the Gulf oil spill disaster to $43. Yes, some may argue that BPstock is not the only one in the industry to take a dive right now because of many factors,speculation about the price of oil, supply and demand forces, etc« but BP stock has takena deeper plunge. The American public has decided to boycott BP, and all the bad publicity willamount to company losses.

It is obvious to me that a competitive free market, the consumer¶s freedom to choose when, howand where to get goods and services is the ideal way to reward good business practices and to³crush´ the bad apples. Interestingly enough while ExxonMobil, Hess, BP andothers¶ stock prices are down 10-15% YTD, Chevron is up 10.95% YTD. This past year,Chevron invested $144 million in community initiatives around the world according to thecompany¶s corporate responsibility report. ³Global economic prosperity and quality of lifedepend on secure supplies of reliable, affordable energy,´ said John Watson, Chevron chairman



and CEO. ³Every day, Chevron employees produce and deliver energy in a safe, environmentallysound and socially responsible manner, creating enduring economic and social value.´

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