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Deep Water Horizon

Well, everyone wants cheap oil, and in the Gulf of Mexico you have it.  You can just spoon the stuff off the surface of the water.

At the moment BP are getting it tight.  They are everyone’s most Unfavourite Aunt Sally with everyone from the President down thinking they are justified in having a pot shot at them.  But is this actually fair?  Whose fault is it that this dreadful mess happened?

If you are American or live on the Gulf Coast this is probably not what you want to hear, but bear with me and we will take a colder, more jaundiced, look at the issues.

There were 126 people working on Deepwater Horizon when it blew up.  Only 8 of them were BP employees.  79 worked for Transocean who actually owned and, crucially, operated the rig.  41 worked for other contractors such as Anadarko Petroleum Corporation a partner with BP of which BP owns 65%, Andarko 25% and Mitsui Oil Exploration 10%.

M-I Swaco provided all the mud-engineering work on the rig.

And Halliburton (everyone’s favourite American engineering firm), and as you will doubtless remember, ex Vice President Dick Cheney’s old firm, were responsible for cementing on the sea bed.

Cameron International provided the blowout protection valves which, um er didn’t.  Love to be a fly on the wall there.

Now, which of the above, and to what extent any of them, are in any way liable for what has happened will be matter for the forthcoming Congressional Inquiry.  Thereafter it will undoubtedly open in the Courts for a run that will rival “The Mousetrap”.

It has been reported that Professor Robert Bea of the Centre for Catastrophic Risk Management at the University of California has drawn up a short and probably incomplete list of possible matters that any Inquiry might care to examine.

Improper Well Design
Improper Cement design
The cement bond logs and the level of the oversight
Possible bad decision making with an examination of what happened to the pressure barrier that allowed the specialist mud to be replaced with sea water.
Examination of any warnings spotted, analysed and acted on.  Or not as the case may be.
Improper operating procedure.
Flawed designs and maintenance.

Now in reality it just aint likely that ol’ BP is going to be responsible for all of the above.

The Inquiry should examine the role of the Regulator too.  Because if it doesn’t you can be certain the Courts will.  Here is a guess as to the kind of question that will be asked.

Did the Department of Interior Mineral Management Service properly assess and manage the natural hazard in this kind of operation in a prudent manner?

And for the Regulator this is the nasty question.  Since it was known that there was no technology available to deal with a blow out at that depth, were the Public and the environment placed at risk by the Department’s failure to properly assess these risks prior to the issuance of a license to drill in a miles’s depth of heaving open ocean?

It is the role of the Regulator to make certain that demand for a product does not expose the public to potential damage.  Did it?

If not then Uncle Sam picks up some of the tab too.

Or did the need to maintain a stream of cheap oil and local political pressure over-ride common sense?

As to compensation, the people of the Gulf may be in for a nasty surprise.  Some in the US seem to think BP’s going to pay for everything.  I heard one woman on the radio this morning putting in a claim for not having oysters to sell in a restaurant.  Hmm perhaps.

There are set scales for what can be paid.  It is not open season.  Damages are set.  The current spill might raise a fine of say $2.8 billion.  If gross negligence or willfull conduct is proved, (thats a whole game in itself) that rises to $11.1 billion.  But you have to prove it.  And you have to decide who is liable.  Law suits take forever – see Bhopal – and no one gets paid until its all decided who and in what proportion is liable. 

The talk seems to be of removing the limits retrospectively.  Well that’s just another court battle in the making.  And if you do……who the hell is ever going to get your oil out of the offshore deposits?  No other company will touch working in American waters again.  Period.

The real way forward of course is to get off oil, but that may be an even bigger problem to solve.

 Copyright David Macadam 2010