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Five Ways to Prevent the Next Deepwater Horizon

As I write this piece on Day 70 of the Gulf oil spill, the start of the 2010 hurricane season threatens to further slow the containment of the Deepwater Horizon well.

But obviously, as we've moved into the third month of the ongoing disaster, the weather is only the latest of the numerous setbacks suffered in the struggle to shut down the broken well. A quick recap of the biggest challenges BP and the federal government have faced to date:

  • The failure of the original containment dome installed by British Petroleum on May 7-8, clogged by the formation of chemical crystals produced from a mixture of gas and frigid seawater.
  • The May 11 decision to abandon the installation of a smaller containment "top hat."
  • The failure of the May 26-29 "top kill" procedure to plug the broken blowout protector.
  • The June 3 failure of the diamond-edged saw intended to produce the clean cut needed to smoothly cap the well riser. A robot, wielding shears, eventually produced a jagged cut that permitted the placement of a containment cap and the partial capture of the estimated 35,000-60,000 (and counting) barrels of oil gushing daily from the broken pipe.
  • The June 23 temporary displacement of the containment cap by a robot -- a mishap fortunately corrected shortly afterward. 

As this suggests, there have been few decisive answers to the engineering challenges posed by Deepwater Horizon. BP's containment efforts, and they have been herculean, numerous, and ongoing, have yet to halt the leak, and the gargantuan spill appears almost certain to continue until a relief well is completed in August. In the interim, the oil will continue to flow and to despoil the Gulf ecosystem and economy.

My own experience suggests that environmental pollution, even comparatively small discharges, can be notoriously difficult to fix. About 10 years ago, I unexpectedly found myself directing the clean-up of a building-scale environmental emergency. At the time I was managing a national commercial real estate portfolio. One of my properties was a research and development project tenanted by a manufacturing firm under a long-term lease. After years of occupancy, the tenant exercised a termination option and vacated.

Subsequent inspection and testing revealed that, in blatant violation of its lease, the tenant had left behind a witch's brew of chemical residues -- including dust from silver and mercury (both toxins) -- that had penetrated the building's plumbing and ventilation systems. Testing and clean-up -- which required the use of space-suited technicians, quantities of crime scene tape, and prominent haz-mat postings -- took upwards of three months. And (unlike Deepwater Horizon) we were working on firm ground, rather than at a depth of 5,000 feet below sea level.

My experience with that manufacturer leads me to believe that environmental contingency planning is typically given short shrift by many businesses, unless substantial financial liability is anticipated in the event of environmental problems. That was certainly the case with my tenant. The recently revealed shortcomings of oil industry containment plans for deepwater spills suggest that my concerns about the quality of corporate planning for environmental contingencies are hardly misplaced.

So, how do we prevent another Deepwater Horizon? The following suggestions couple additional safety requirements for deepwater drilling with penalties to reflect the environmental and economic costs of drilling gone wrong. By enhancing safety standards and motivating companies to develop more careful contingency plans, both approaches should help protect America and the petroleum industry from the disasters that can arise in the course of doing business.

Remote shutoff capability. Require additional back-up systems to shut down offshore wells automatically. Norway and Brazil require acoustic triggers that can shut down deepwater wells remotely, in the event that mechanical systems fail. Norway has required acoustic backup systems on all rigs since 1993.

Relief well capability. At minimum, adopt Canada's "same-season relief well capability" requirement. To receive a deepwater drilling permit in certain Canadian Arctic waters, a petroleum company must demonstrate that it has a viable system that can be deployed to drill a relief well in the same season. The Canadian requirement has been in place for 34 years. Even more to the point might be to require that a relief well be drilled at the same time as the initial well. Yes, this is an expensive precaution, but it is well below the billions that BP will spend to contain Deepwater Horizon, clean up the spill, and make good on economic claims.

Spill penalties. Impose meaningful financial penalties for deepwater spills. What is meaningful? Enough to incentivize private industry to take environmental contingency planning seriously. The $75 million per incident liability cap associated with a deepwater spill was clearly insufficient to motivate BP and its peers to develop effective contingency plans. An obvious approach would be to repeal the Oil Pollution Act's $75 million per incident liability limit on deepwater drilling.

Onshore facilities are subject to a $350 million liability cap that can be adjusted by federal regulation -- the Deepwater Horizon disaster suggests that deepwater drilling should be subject to equal or more rigorous penalties. Civil and criminal penalties in force under the Oil Pollution Act should also be re-examined for adequacy in ensuring deterrence.

Energy legislation. Also warranted: the development and passage of comprehensive energy legislation to reduce dependence on fossil fuels. As attorney Shari Shapiro, my colleague and fellow blogger, observes, "Deepwater Horizon needs to be this generation's Love Canal moment.  Congress has an unparalleled opportunity to capitalize on the anger, the shock and the awareness of the fragility of the environment to pass comprehensive energy legislation.  Thank god, Love Canal moments do not come along often.  It would be a pity to waste it."

Moratorium. The Obama administration has proposed a six-month moratorium on deep water drilling. That plan has been overturned by a federal judge. A legal appeal is planned and the administration is readying an alternative moratorium approach. I'm mindful of the economic costs associated with a moratorium, but we need a breather to reassess the safety of deep water drilling. Indeed, Deepwater Horizon has already produced a temporary risk management ban on deepwater drilling -- in Norway, which halted deepwater drilling in early June to evaluate the lessons of the spill.

Meanwhile, oil continues to flow into the Gulf of Mexico.

Leanne Tobias is founder and managing principal of Malachite LLC, an advisory firm that specializes in the development, leasing, management, financing and certification of sustainable or green real estate on a global basis. You can get in touch with Leanne at this link.

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