The ramifications for corporate America and particularly, the oil industry, from the Gulf of Mexico oil spill are becoming clearer. In his 15 June 2010, address to the nation, President Obama stated his financial and operational expectations of BP prior to his meeting the company’s CEO, Tony Hayward on 16 June.
In essence, BP will be required to fund compensation for the families of dead and injured workers and those who are suffering economic hardship as a result of action which the President described as “reckless”. The distrust of BP was evident by the compensation fund, which is likely to be billions of dollars, being administered by a third party.
But the BP spill has changed the way that oil exploration and extraction will occur in American waters. Prior to the Deepwater Horizon oil rig disaster, President Obama was moving the country to improved energy independence by reconsidering off-shore oil drilling. Randall Luthi of the National Ocean Industries Association was quoted:
“If the proposed areas ultimately end up being leased, it will represent the most significant increase in access to domestic energy from our oceans in decades…”
The optimism was palpable until BP’s alleged cost-cutting led to a poorly constructed well head at Deepwater Horizon. Cost cutting by BP was identified by Professor Andrew Hopkins as a major reason for the fatal explosion of Texas City oil refinery and it looks like Deepwater Horizon is a further instance of poor corporate decision making.
President Obama said that
“A few months ago, I approved a proposal to consider new, limited offshore drilling under the assurance that it would be absolutely safe –- that the proper technology would be in place and the necessary precautions would be taken.
That obviously was not the case in the Deepwater Horizon rig, and I want to know why. The American people deserve to know why. The families I met with last week who lost their loved ones in the explosion — these families deserve to know why. And so I’ve established a National Commission to understand the causes of this disaster and offer recommendations on what additional safety and environmental standards we need to put in place. Already, I’ve issued a six-month moratorium on deepwater drilling. I know this creates difficulty for the people who work on these rigs, but for the sake of their safety, and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue. And while I urge the Commission to complete its work as quickly as possible, I expect them to do that work thoroughly and impartially.”
Admirably, Obama never forgets that the disaster killed workers but the timelines he has set must surely cause some problems for the oil explorers who were gearing up based on the earlier optimism. Political and election timetables are always in the back of politicians’ minds but there is no indication of re-election being a consideration in Obama’s statement on the disaster.
The guarantees of safety in offshore drilling in the future will need to be solid and given the global nature of the companies in this industry, Obama’s demands will have broad impacts. Sadly, the Australian government will be following Obama’s lead where it had the chance to improve safety after its own major oil spill in the Timor Sea less than 12 months ago.
“An oil spill off the WA coast regarded as one of the worst-ever environmental disasters in Australia was caused by poor decision making and corporate greed, a senior industry source has claimed.
The man, an installation contractor part of the drilling team at the West Atlas rig, said the spill happened after drillers did not cap the associated Montara oil well properly, causing it to burst.” [emphasis added]
The safety issues are the same and the report of the Australian Commission of Inquiry into the Montara Oil Spill is due for release on 18 June 2010 and is likely to gain international attention. A spokesperson for the Minister for Resources and Energy, Martin Ferguson, has confirmed the report is due on 18 June and that the Minister will be releasing the report shortly after.
The world’s media will focus on the environmental impact of the Montara oil spill as it has on the Gulf of Mexico spill but it is safety engineering and management that will stop spills like this recurring and it is hoped that the Montara report may flag some of the safety issues that will assist President Obama’s own commission of inquiry.