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Can legislators reform oil industry’s safety culture? January 7, 2011

Posted by mytruthaboutoil in Geostrategy, Oil (general), Oil giants.
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The Deepwater Horizon disaster was the result of mistakes that call into question the entire oil industry’s safety culture and demand better regulation.

So concludes the final report from the National Commission on the BP Deepwater Horizon Oil Spill released yesterday. The nonpartisan commission found that the initial explosion on the rig — which killed 11 workers and resulted in the uncontrolled release of millions of gallons of toxic crude into the Gulf of Mexico — could have been prevented.

“The immediate causes of Macondo well blowout can be traced to a series of identifiable mistakes made by BP, Halliburton, and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry,” the report found.

One of the world’s largest drilling contractors, Swiss-based Transocean was the owner and operator of the rig, which was drilling for BP. Halliburton, an international company with headquarters in Dubai and Houston, was the contractor in charge of cementing the well closed.

The nonpartisan commission also faulted an ineffective regulatory system. To fix that, the report calls on the U.S. Interior Department to create an independent safety agency to oversee offshore drilling and recommends increased funding for agencies responsible for responding to spills.

“Federal government oversight utterly failed to provide an acceptable level of protection for those on the rig and for the Americans who call the Gulf their home,” said commission co-chair and former U.S. Sen. Bob Graham (D-Fla.). “Our regulators were over-matched.”

The report recommends increasing the $75 million liability cap for damages related to offshore drilling accidents, and for dedicating 80 percent of fines and penalties from the BP spill to restoring the Gulf, where oil continues to wash ashore.

Environmental advocates echoed the commission’s call for improved regulation.

“After evading adequate oversight for years, the oil industry must re-adjust to being a regulated industry,” said Catherine Wannamaker, senior attorney at the Southern Environmental Law Center. “Sidestepping environmental review of risky deep water drilling can no longer be an option with an oil industry that lacks the ability to prevent and stop disaster. The damage and risk borne by coastal life and health shouldn’t be dismissed by rushing back to business-as-usual.”

But Big Oil did not exactly rush to endorse the commission’s findings, suggesting that the recommended reforms won’t come easy. Erik Milito of the American Petroleum Institute, the oil industry’s trade group, said that casting doubt on the entire industry based on a study of a single incident does a “disservice” to those who work in the industry and are committed to safety.

The commission was critical of API. Noting that the group has played a “dominant role” in developing safety standards for the industry, the report said the group’s ability to serve as a reliable standard-setter is compromised by its role as the industry’s principal lobbyist and public policy advocate. API spent more than $4.8 million lobbying federally in 2010 alone, according to the Center for Responsive Politics.

Further complicating reform efforts is the fact that Big Oil has invested heavily in congressional campaigns to ensure its concerns are heard in Washington. In 2010 alone, the industry contributed more than $9.1 million to congressional candidates with 71 percent of that going to Republicans.

One of those Republicans — Sen. David Vitter of Louisiana, who received more than $486,000 from the oil and gas industry over the past five years — was also skeptical of the commission’s report, complaining that claims of systemic safety problems in the industry were “overstated.”

While Vitter’s colleague Sen. Mary Landrieu (D-La.) was generally supportive of the commission’s findings, she objected to extending the window for reviewing drilling applications from 30 to 90 days. She also expressed concern about the impact that raising the liability cap would have on small companies. Instead, Landrieu and other senators are working on a mutual insurance system to spread the risk among offshore operators.

The oil and gas industry was the fourth-largest contributor to Landrieu’s campaign over the past five years, contributing more than $373,000.

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