Here is the list of the National Commission’s main recommendations following the BP oil spill.
- Offshore drilling can be done safely, and US oil reserves in deep water and the Arctic are vital resources that the country will need
- A government safety agency should be set up to oversee offshore drilling
- Offshore regulators including the Interior department and the coast guard should be given significantly increased funding
- The oil industry should create a “self-policing entity” to establish and enforce safety standards
- Companies should have to show they have the technology to control an underwater blow-out before they are given permission to drill
- The government should develop the expertise needed to assess and supervise the control of blow-outs
- The $75m cap on the liability faced by companies in the event of a spill (which has been voluntarily waived by BP) should be substantially increased.
- 80 per cent of the penalties for the spill imposed under the Clean Water Act should go for long-term restoration of the Gulf of Mexico
- The US should launch an immediate research program into the issues raised by possible drilling in the Arctic, and begin talks with other countries such as Russia and Greenland that plan to develop Arctic reserves
Much of this was leaked this morning.
The civil suit against BP brought by the US government on Wednesday had been inevitable since we first found out that thousands of barrels of oil were spilling into the Gulf of Mexico. The timing of Wednesday’s announcement, mandated by the judge at the New Orleans court where the trial will be held, was the only surprise. It perhaps did not send the best message about the business-friendly nature of the administration, on a day when President Obama was courting many of America’s top CEOs.
The share price reaction was modest, reflecting the fact that while the headlines are terrible for sentiment, investors always knew this day would come. The news looks bad for BP, but shareholders can still hope for better, as the Lex column points out.
Nevertheless, the Department of Justice’s action is a salutary reminder that, eight months after the fatal accident on the Deepwater Horizon, and three months after the ill-fated Macondo well was sealed for good, BP is still not even close to finding out exactly how much the disaster will cost.
When President Obama spoke about his new-found spirit of compromise after the Democratic party’s “shellacking” in the midterm elections, energy policy was one of the areas where he suggested Democrats and Republicans might be able to work together. The deep partisan divide over climate policy might make that seem a ridiculously hopeful aspiration, but in fact there are some areas of energy policy where the two parties ought to be able to find common ground.
Translating that into effective legislation, however, will be something else again.
As the briefing heads towards the end, questioning comes back to the “negative pressure test”, used to determine whether the cement job had been successful and the well had been sealed properly so no oil and gas could escape.
On the afternoon and evening of April 20, the rig crew had two attempts at conducting a negative pressure test, intended to check what would happen if the heavy drilling fluid were flushed out of the riser and replaced with lighter sea water, as part of the standard procedure for disconnecting the rig and moving away.
Many of the questions are attempts to get behind the report, for example, whether BP was taking extra risks to cut costs, how high the responsibility goes up the organization and whether there is a systemic problem at BP that needs addressing.
Now we come to what the BP team believes were the causes of the accident, and the first company in the line of fire is Halliburton, which was the contractor responsible for the cement job to seal the well.
There is a heavy emphasis placed on the cement “foam”: cement injected with nitrogen to make it lighter, to avoid damaging the rock formation of the reservoir and making it harder to subsequently produce oil.
Sure enough, the presentation moves on to a lengthy assessment of some of the factors that BP believes are not responsible for the accident, which have been cited in Congress as possible causes.
One is the decision to use just six “centralisers” to stabilize the steel casing inside the hole, instead of 21, which modelling had suggested would cut the risk of oil and gas leaks. Only six were used because the BP team working on the well believed – incorrectly – that they had an unsuitable type of centralisers on board the rig. The investigation team concluded that the decision to use only six centralisers “likely did not contribute to the cement’s failure to isolate the main hydrocarbon zones”.
Bly goes on to give the 30-second version of the report’s conclusions, which is that there were eight distinct failures that led to the accident, and it was only because all eight of those factors went wrong that the explosion and subsequent leak occurred.
“At the end of the day, all eight of these things had to occur to get from the initiation of this to the end of the accident,” he says.
One member of the accident investigation team worked on the inquiries into the Challenger and Columbia space shuttle disasters, which is highly relevant experience for understanding the failures of complex engineering procedures in the difficult and dangerous conditions in a mile of water and a further 2 ½ miles of rock below the sea bed.
BP’s presentation of the results of its internal inquiry into the Deepwater Horizon disaster is being delivered in Washington, in recognition of the fact that the most important audience it is addressing is in the US government and Congress.
The general message of the report is that mistakes were made by BP, but also by Transocean and Halliburton, the two key contractors on the project. Without failures by all of those companies, the accident would not have happened.