To start off with, I have to say like many people I’m deeply concerned with the oil spill at Horizon in the Gulf of Mexico. It is a generational environmental hit that cannot be overstated. Perhaps BP deserves more credit than it’s getting for responding fast with a massive amount of resource, no finger pointing, and for putting its whole company on the line, but this is a BP caused problem, so we ought to expect that. However, we should not ignore the role our government had in this debacle.
I’m not a happy camper. We’ve been doing drilling offshore with a very, very good environmental track record for decades. The laws, systems and technologies in place to prevent exactly these problems are known, tried and tested. When this is over we are likely to find that it wasn’t the laws and prevention technology that failed, it was not giving them the proper respect. Or put another way – “operator error” at BP and our government.
BP has been dinged for a number of years now for the dark underbelly of the John Browne era. When John Browne took over, he really turned the entire industry upside down, opening an era of super M&A, and out wheeling and dealing the other oil companies including the acquisitions of Amoco and Arco, pushing the Beyond Petroleum concept leading the way in solar, renewable, and carbon. His and BP’s contributions should not be understated. But industry people will generally tell you that the BP of that generation also built a culture of short term thinking, make your numbers and milestones, cutting maintenance and safety corners if need be, and leave the problems for the next guy. This is the same picture that has been emerging in the media, administration and congressional inquiries into what happened at Horizon just before the explosion, systemically ignoring best practice to save economics on a challenging well. It makes me cringe. I hope it’s not true.
Once it happened, we exposed a bigger systemic problem. BP is throwing everything known at this thing, and making up new technologies every hour racing for a solution. It’s a company defining event and they know it. The systemic problem is that a catastrophe like this in deepwater is new and challenging. The fixit tools just don’t exist. Handling the same situation if the rig had stayed up, or if we were onshore, would likely have seen many of the remediation techniques already work. But no one has EVER dealt with problems like this at depths like these before. The oil drilling and spill containment technology arsenal we’ve built up over the years has never been tried (and maybe really not even planned) to operate subsea in deep water. These are part technology issues and part planning issues. Neither of which are things you want to be trying out for the first time the day the crisis hits. Both industry and government should have seen this one coming.
The US government has culpability here, too. The US government is the landowner here, collects big checks from BP and others from drilling, and was just as culpable in disregarding the risks and just as unprepared for the results. The deepwater risk plans were filed by the oil companies as asked, and apparently never challenged by the regulator. When Congressmen berate ExxonMobil for cookie cutter risk plans almost word for word the same as BP’s that talk about walruses in the Gulf of Mexico, I want to know why the regulator never caught this when it could have mattered. The same regulator who negotiates the deals and collects the checks? Mr. Congressman, Mr. President, oversight of that is YOUR fault, not BPs. The are the oversightee, you are the oversightor.
If my pit bull bites a child because I can’t control it, the dog gets put down, but I pay the piper. There’s a saying that there are no bad dogs, just bad owners. If my tenant is breaking laws and someone gets hurt, and I hadn’t spoken up or enforced my own lease, don’t I have some responsibility to the victim? Does the term negligence come to mind?
The US government had zero capability of its own in place to deal with a spill of this magnitude, meaning all of the technical heavy lifting was squarely on BP’s shoulders, and to believe the media reports coming out now, the Federal government moved fast but was highly unorganized on its own side failing to coordinate Federal, state and local response (remember the old sarcastic, “Hi, I’m from the government, I’m here to help” line). That’s about like leasing out my building, telling the tenant they’re liability is capped, and then hoping they happen to decide to get insurance for me anyway.
And the government’s reaction seems very political, when I want to see more work. Just shut up and do it. The moratorium on offshore drilling smacks of egregious kneejerk politics, did nothing for the crisis at hand, and hurt the very communities under economic strain. A recent WSJ article even quoted a number of the technical experts the administration had cited as the justification for the moratorium who publicly slammed the administration for misrepresenting their analysis once they saw the “final, final” report, not the “final” one they signed off on.
Perhaps worse, the Obama administration’s shakedown of BP, like it’s previous shakedown’s of Chrysler to force a firesale and riskless windfall for Fiat, is very, very disturbing. We have the best court system in the world for just this sort of thing, and it makes me shudder to see what we are doing to the rule of law, crisis or no crisis. What, you think a Southern trial lawyer can’t hold his own with BP? Get real. Mississippi by itself mints trial lawyers faster than BP pumps oil. Item number 1, BP should not be able to use Congress and the administration as a shield to try and cap its liabilities (we apparently did that ourselves at a paltry $75 mm), and second, the administration should not be blatantly strong arming a private company to agree to payments above and beyond our own legislated cap, without going through the courts we set up. Hugo Chavez does that. America does not.
We don’t need “down with BP polemics” and finger pointing. We don’t need to wreck the rule of law to CYA the government’s errors. We may not even need new laws. We do need our regulators to actually do their job. We do need BP to pull out all the stops to plug the leak, and to pay the price for its recklessness, and we do need the industry to start working on planning and technology ahead of time when it can do the most good.
Credit where credit is due: I applaud the administration for moving fast, and I applaud BP for not finger pointing and putting their money where their mouth is, now. I apologize to everyone for the long rant, I’m almost done. But I grew up in Houston, and the Gulf of Mexico is home to the beaches, and the wildlife, and the sea food, and the industry, that defined my home town. It’s sickening that part of me is a tiny bit relieved the oil slick is moving East not West. Frankly, I’m not sure whether the Obama Administration or BP deserves to survive this debacle. The Gulf of Mexico and 40 years of track record in the offshore drilling industry deserve better.
Neal Dikeman is a partner at Jane Capital Partners, a cleantech merchant bank. He is the Chairman of Carbonflow, and Cleantech.org, and is Texas Aggie.