Four years after Macondo, offshore Arctic beckons, speakers warn

Lessons learned from the Macondo deepwater well incident and crude oil spill are in danger of being minimized in a push to develop offshore Arctic oil and gas resources, speakers warned during two separate forums around the anniversary of the offshore well’s Apr. 20, 2010, blowout and explosion that took 11 lives and destroyed the Deepwater Horizon semisubmersible rig.

The global oil and gas industry, government regulators, and local leaders will need to work more closely than ever to avoid the same mistakes, speakers said at an Apr. 17 forum at Resources for the Future (RFF) and an Apr. 21 conference sponsored by the Bipartisan Policy Council (BPC).

“You’re never finished. The goal has continued to move. It’s not static,” observed Christopher A. Smith, principal deputy US energy secretary for fossil energy, who spoke at both events.

“But you can go down to Houston and visit the Deepwater Containment Co., which uses a technology that didn’t exist before the Macondo accident,” Smith said on Apr. 21. “The US Department of the Interior also has done a good job of better defining its regulatory responsibilities and eliminating conflicts of interest. You have to be thoughtful about how you share information, but you also have to keep moving forward.”

Michael R. Bromwich, who oversaw the 2010-11 reorganization of the US Minerals Management Service after the Macondo incident, said during the BPC event: “We’re in a lull right now. Shell’s drilling off Alaska was a series of fiascoes about future activity there. It raised real questions about whether it will continue.”

Shell Offshore Co.’s Beaufort and Chukchi Sea leases raise many questions about both the industry’s capacity work safely and the government’s capacity to regulate Alaska offshore oil and gas activity effectively, said Fran Ulmer, who chairs the US Arctic Commission.

Primary mistakes

“We need to prepare a region that’s both exceedingly valuable and exceedingly vulnerable for what lies ahead,” Ulmer suggested during panel discussions at both events. Ulmer also said that complacency and overconfidence were the biggest mistakes industry and government made before the Macondo incident.

Bromwich agreed. “What struck me after I reported for work in 2010 was how undeveloped prevention, spill response, and containment were,” he said, adding, “The question for regulators is whether we’re ready, given the Arctic’s challenges. If a company apparently can’t deal with a spill there, it’s hard to imaging its being allowed to go forward.”

Bromwich added, “We’re in a much better place now, but we can’t simply rely on changes implemented in 2010-11 without continuing the discussion, review, and activity.”

Other speakers emphasized the importance of developing practices and regulations that effectively address the worst possible problems that could result from oil and gas activity in the Arctic and other frontier regions. “It wasn’t technology, but people, which failed at Macondo,” said Richard A. Sears, a consulting professor at Stanford University’s School of Earth Sciences, at the BPC event. “Training needs to be better. Beyond that, more needs to be invested in determining how to respond.”

Sears said, “The oil companies don’t know how to respond to a major accident in the Arctic. Their managements aren’t asking whether they would be able to survive the consequences financially. Even with a company the size of BP, with the damages it’s going to have to pay after Macondo, I don’t think the Gulf of Mexico will be profitable for it on a life-cycle basis.”

Smith called for greater recognition that there are potential consequences in the Arctic for indigenous peoples who have been there for centuries that go beyond dollars and cents. So did other speakers at RFF’s conference on Apr. 17.

‘Wanted to move on’

Robert B. Gagosian, president of the Consortium for Ocean Leadership, said the group which has operated since 2007 is trying to get new ideas for dealing with an offshore oil spill to address whether new technologies need to be developed for use in more severe conditions.

“I don’t see strong leadership right now,” Gagosian said. “People and groups aren’t working together. My concern is that we’ll be in the same situation 10-20 years from now because so many people wanted to move on.”

Steve Cochran, director of the Environmental Defense Fund’s Mississippi River Delta Restoration Project, stated, “It’s important to remember that penalties matter. They serve to remind operators that mistakes can cost their companies money.”

Leonard Shabman, an RFF senior scholar who previous was a staff economist at the US Water Resources Council, added, “So far, the whole discussion has been about fixing things that are broken, not preventing them from breaking in the first place. We need more data. Without it, people make [stuff] up, and very quickly start operating in a fact-free zone.”

William Y. Brown, the US Bureau of Ocean Energy Management’s chief environmental officer, said the US Department of the Interior agency is “quite involved” in studying Arctic resources. “We would like to see a standing committee within the National Academies of Science conduct research both domestically and internationally,” he indicated.

Mark Fesmire, Alaska regional director for another DOI agency, the US Bureau of Safety and Environmental Enforcement, said it is a co-leader of the US delegation to the Arctic Council studying pollution sources and containment. “I think BSEE has spent several million dollars this year to research Arctic spill response,” he said.

Not yet ready

However, Beth Kerttula, a fellow at Stanford’s Center for Ocean Solutions who formerly served in Alaska’s House of Representatives, said the state is not ready for Arctic offshore oil and gas development. “Alaska now is in the unenviable position of being the only coastal state without a management program,” she told participants at RFF’s conference. “We lost it by only 1 vote in the legislature because the oil industry spent so much money lobbying against it. We need to develop spill prevention capabilities and response mechanisms. We also need a decent port.”

Alaska’s offshore oil and gas potential looked more attractive in 2008 than it does now since major potential resources have been identified on continental shelves on both sides of the Atlantic Ocean, according to David W. Houseknecht, a research geologist at the US Geological Survey in Reston, Va. “Ice conditions and the relatively small understanding of oil and gas development impacts on forms of life there still need to be addressed,” he said at BPC’s event.

“We tend to look at high-consequence risks and probability more now,” said Oliver Moghissi, vice-president of technology at DNV GL North America Oil & Gas who also participated in that conference. “We need to add operator responsibility, regulatory oversight, and better management. Damages from an incident in the offshore Arctic may not be as great as in the [Gulf of Mexico], but the event is much more likely.”

Operators need to have technical competence and experience, the right suppliers and contractors, and good third-party oversight to ensure that risks are controlled and problems are anticipated and managed, Moghissi maintained.

“Our understanding of the subsurface environment and the technology necessary to develop resources is farther advanced than our knowledge of impacts,” Houseknecht said. “It’s becoming more apparent that the Arctic environment is increasingly international forces, including climate change. We’re learning more each year, and increasingly realize how little we actually understand.”

Bromwich said Interior started to promote development of global standards and practices following the Macondo incident, but soon discovered that other countries sometimes resist suggestions that they change their regulatory regimes. The challenge is to help them develop acceptable regulatory structures and get the necessary training for their enforcement officers, he explained, adding, “The problem is that their appetites for resource development often exceed their desires to promote safety and environmental protection.”

Contact Nick Snow at nicks@pennwell.com.

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