U.S. Offshore Drilling Safer Post DWH, Panel Says

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April 17, 2013

Panel Report Card: Administration received a grade of B, industry a B-, and Congress a D+

The Deepwater Horizon oil rig burns in the Gulf of Mexico in April 2010.
The Deepwater Horizon oil rig burns in the Gulf of Mexico in April 2010.

By Jim Efstathiou Jr.

(Bloomberg) — Offshore drilling is safer than prior to the BP Plc spill in 2010 even though the U.S. Congress has failed to pass legislation tightening rules, according to members of a government panel that investigated the accident.

Response to spills has “substantially improved” since BP’s Macondo well in the Gulf blew out on April 20, 2010, killing 11 workers and spewing more than 4 million barrels of oil that spoiled the shores of Gulf Coast states, the group, Oil Spill Commission Action, said today. The group includes former members of a panel appointed by President Barack Obama that in 2011 recommended steps to prevent future spills.

While regulators and the drilling industry have responded to the recommendations, Congress hasn’t, said Bob Graham, a Democrat and former Florida senator who was co-chairman of the presidential commission. Congress earned a “D+” today, higher than its “D” grade in 2012, a year after the commission’s work ended with the delivery of its report to the president.

“Three years have passed since the explosion and Congress has yet to enact one piece of legislation to make drilling safer,” Graham said today in a video news conference. “Most safety provisions we discussed are regulatory, administrative. These issues are of significant national importance that they should be enacted in statute.”

The group’s 2013 report card maintained a “B” grade for the administration and raised the industry’s mark to “B-minus” from “C+.”

Pending Recommendations

Among the recommendations awaiting congressional action is a proposal for drilling companies to pay a fee that would cover costs for improved U.S. inspections and oversight. Gains made in that area may be undermined by automatic budget cuts known as sequestration that took effect March 1, Graham said.

Another recommendation is for Congress to review the $75 million ceiling on spill liability in place for more than 20 years. That amount would have been exhausted within days of the BP spill, crippling work to restore soiled coastlines and damaged industries, Graham said.

The liability cap proposal and other issues were discussed this week in a meeting the group had with Senator Ron Wyden, the Oregon Democrat who heads the Energy and Natural Resources Committee, Graham said.

“We can anticipate the committee to be giving attention to these issues,” Graham said.

Interior Overhaul

A month after the BP blow out, Obama replaced the Interior Department’s Minerals Management Service, faulted for lax regulation of offshore drilling, with three offices to issue leases, oversee drilling safety and collect royalties The agency has strengthened leasing, permitting, safety and oversight, according to today’s progress report from the group.

BP, which is based in London, is appealing a court ruling upholding decisions by the administrator disbursing cash from an $8.5 billion settlement that the company says will force it pay billions more than expected. The company will face a jury trial Aug. 25, 2014, in federal court in Houston on investors’ multi- billion-dollar allegations that the company hid the true size of the spill to limit the effect on its stock price.

The U.S. has made gains to improve safety in regions such as the Arctic, where pressure is mounting to develop oil and natural gas resources, said Frances Ulmer, a commission member and former chancellor of the University of Alaska Anchorage.

Royal Dutch Shell Plc, which has spent about $4.9 billion and seven years preparing to explore off Alaska’s north coast, was blasted by the government for mishaps in its work last year. A department review found shortcomings in oversight of Shell’s contractors and said the company started its work “not fully prepared” for the challenges it faced.

“A lot of work has been done by all the parties advancing our understanding of the Arctic,” Ulmer said. “We continue to believe that unless both the industry and government focus intently on preventing, preparing and planning, that we will not be as ready for these frontier areas as we would like.”

The full report can be downloaded on the OSC Action website, HERE.

Copyright 2013 Bloomberg.


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