Enforcement, monitoring are critical to accident prevention in oil drilling offshore

Saturday, August 21, 2010

HOW, EXACTLY, did the government fail before the sinking of the Deepwater Horizon oil rig in the Gulf of Mexico? A report from the White House Council on Environmental Quality inadvertently makes at least one thing clear: The problem wasn't an underdeveloped drilling approval process. Starting with the production of a guiding five-year plan for oil and gas on the Outer Continental Shelf and ending with a series of site-specific approvals, the offshore drilling regulatory process (shown at right) is byzantine enough. It doesn't need more layers of approval.

But the regulation was misapplied. Federal officials excluded BP's drilling permit from environmental review based on documents produced in the 1980s, before deepwater drilling was common. Even more recent papers in the chain of approvals before the Deepwater Horizon accident understated risks associated with deepwater exploration, where blowouts are low-probability but high-consequence events.

For example, they did not consider the massive Ixtoc I blowout when assessing the likelihood of a catastrophic accident because the spill wasn't in American waters. Perhaps including Ixtoc wouldn't have changed regulators' calculations about the probability of an accident -- after all, it was just one well of many thousands in the gulf. But approval documents also underestimated the consequences. They expected, for example, that a big blowout would result in a slick around the accident site, but that between cleanup efforts and natural "weathering" of the oil, the released crude would pose little danger to coasts.

As the council released its report, the Interior Department announced that it would update its assessment of deepwater drilling's risks and insist on environmental review for all deep-water drilling applications for now. Congress also should give Interior more time to assess exploration plans so that regulators can complete meaningful environmental reviews. With these policies in place, regulators might more often require changes in drilling proposals to guard against accidents.

It's also necessary to monitor drilling operations properly after permits are granted, an issue that was arguably a bigger problem in the Deepwater Horizon case than the project's permitting.

It is even more important to remember that even the best regulatory regime won't be perfect, so Congress should sharpen the economic incentives for oil companies to drill responsibly. A thorough reform of offshore drilling regulation should wait until investigations are finished, but lawmakers needn't wait to lift the cap on the liability that drillers face in an accident. The law should make clear that companies will have to pay for damage they cause.


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