The spill report—1

First, the shortcomings.

The report to US President Barack Obama by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling has drawbacks. As a foundation for further regulatory response to the Macondo disaster last April, however, it's important to oil and gas producers. It also contains solid ideas for real and obviously necessary improvement in offshore safety and regulation.

The drawbacks will be dispensed with here. The solid ideas will receive attention in later weeks.

At nearly 400 pages, the report is unnecessarily long. In too many places, historical excursions few will read obscure important messages about the future. Normally, excessive length would be merely annoying. In this case, it seems to betray political agendas.

For example, the report traces in dreary length the history of the old Minerals Management Service. Created in 1982 by then-Interior Sec. James Watt, whose desire to open the whole federal offshore for oil and gas leasing became a celebrity cause of environmentalism, MMS in its last years had become, even before the Macondo tragedy, a whipping post for the political left.

About MMS, only two points need to be made: 1. that combining royalty collection with lease management might have tilted regulation toward revenue generation at the expense of operational safety and therefore might bear on Macondo lapses, and 2. that a post-Macondo reorganization makes the issue old news. These points are easily lost in the spill commission's retelling of the whole MMS story, which a thousand or so words into the narrative begins to feel like political scab-picking.

Political leanings also seem to be at work in the report's contention that "systemic failures by industry management" beyond BP and its contractors were at play at Macondo. The judgment is valid to the extent that operators routinely provided assurances about their abilities to respond to a major deepwater spill that Macondo repudiated.

Behind those assurances lay a determination, now discredited, not to let such a spill occur. But a catastrophic spill occurred in one deepwater well. That fact requires urgent attention and strong response. But no catastrophic spill has occurred from more than 2,500 other deepwater wells drilled since 2006 in the Gulf of Mexico. That fact needs to be part of the response framework. The report's extrapolations skew this essential perspective.

From its thusly distorted stance on pre-Macondo regulation and industry practice, the commission leaps to suggestions for impossibly aggressive regulation. It recommends creation of a new agency in the Department of Interior and new involvement in offshore decision-making by existing agencies outside the department.

Yet the problem isn't that there hasn't been enough bureaucracy focused on offshore regulation. The problem, as the commission report duly notes, is that offshore activity bypassed oversight capability in its volume and technical complexity. Oversight needs to improve, to be sure. But complicating the administrative structures dedicated to oversight will only dissipate resources and hamper activity.

The commission also puts too much emphasis on regulation under the National Environmental Policy Act, the law requiring the government to assess environmental effects of its major activities. Adding layers of NEPA review, as the Interior Department already is doing, multiplies administrative hurdles without enhancing safety.

The problem at Macondo wasn't that an insufficient number of NEPA reviews had been conducted; it was that broad-area assessments contained the standard assurances about response capability that proved unfounded. More reviews would have generated more unfounded assurances without preventing the accident.

The goals now should be to prevent recurrence of anything like the Macondo accident and to develop spill preparedness hitherto lacking without slowing development of oil and gas resources. The report suggests changes able to help the industry and government achieve those goals.

One such change will be discussed here next week.

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