News alarms trouble industry

Dec. 27, 2010
"We live in the midst of alarms; anxiety beclouds the future; we expect some new disaster with each newspaper we read."

Senior Writer

"We live in the midst of alarms; anxiety beclouds the future; we expect some new disaster with each newspaper we read." Abe Lincoln said that in the days leading up to the American Civil War, but it could just as easily have come from any oil man following political developments from the Macondo blowout earlier this year.

Seems every news report brings details of new moves by elected and appointed government officials to ensure what never happened before in decades of deepwater drilling will never happen again.

As a veteran newspaper reporter, I know daily news is "history in a hurry." It would be interesting to see what conclusions future historians will draw from current news reports. For instance, on Dec. 15 the Associated Press reported the US Justice Department filed a civil suit against BP PLC and eight other companies to recover billions of dollars as a result of the Macondo blowout. The suit would hold companies liable for crude removal costs and damages under the Oil Pollution Act and for civil penalties under the Clean Water Act. That's in addition to the government's uncompleted criminal investigation, of course.

Damages sustained by the US are not yet determined, and BP has already waved existing limitations on the dollar amount of its liability and is paying out billions of public and private claims. More than 300 lawsuits have been filed in federal court in New Orleans by individuals and groups seeking financial redress from the blowout that also killed 11 workers aboard the rig.

Other defendants in the case are Anadarko Exploration & Production LP and Anadarko Petroleum Corp., MOEX Offshore 2007 LLC, Triton Asset Leasing GMBH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., Transocean Deepwater Inc.; and Transocean's insurer, QBE Underwriting Ltd., Lloyd's Syndicate 1036. Anadarko Petroleum and MOEX are minority partners in the well. Transocean, which owned the rig destroyed in the blowout, keeps pointing out it is indemnified under a standard drilling contract with BP against any costs resulting from the blowout. It told AP, "No drilling contractor has ever been held liable for discharges from a well under the Oil Pollution Act of 1990." AP reported QBE/Lloyd's can be held liable only up to the amount of insurance policy coverage under the Oil Pollution Act and is not being sued under the Clean Water Act.

Hardline reaction

Considering the government's hardline reaction to a deepwater oil spill in the Gulf of Mexico, this country's most prolific source of oil and gas, future historians might marvel at another Dec. 15 AP report of President Barack Obama meeting with 20 business leaders to discuss how to boost the anemic US economy and improve "their own testy relations." In that meeting, Obama talked of overhauling the tax system, although he wants to strip the oil industry of tax breaks common for other businesses. He spoke of easing business regulation while increasing regulation of oil and gas at a time other countries are seeking the US industry's expertise.

AP reported, "With US unemployment at 9.8% and weak home prices and tight credit placing a drag on growth, the president was looking to shake loose more than $1.9 trillion in untapped corporate cash to help the recovery." Maybe he should build a fire under the US Bureau of Ocean Energy Management, Regulation, and Enforcement that is sitting on drilling permits for even shallow-water projects. Offshore companies are ready to spend money and put people back to work if only the government would release its chokehold on the industry.

Meanwhile, BOEMRE is drafting new offshore regulations before investigation of the cause of the blowout is completed. Director Michael Bromwich claims safety regulation can't wait, which will seem ironic if historians read another Dec. 15 AP report. The US government finally outlawed traditional drop-side cribs "after the deaths of more than 30 infants and toddlers in the past decade and millions of recalls." A new standard for fixed-side cribs takes effect next June.

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