Three Takeaways from the Deepwater Horizon Committee’s Findings

Almost six months after the blowout of the Deepwater Horizon was capped, a commission tasked with analyzing what exactly happened has come out with a report that won’t satisfy those on either side of the issue. While it didn’t ask for a ban on offshore drilling neither did it provide a return to status quo for the oil drillers? The report was moderate in tone, and stressed the now acknowledged need for a tighter regulatory environment where drilling is concerned. There were three big takeaways/concerns that came out of the report which are worthy of comment:

1)  The commission proposed a catch all funding mechanism to pay for all the extra regulatory work that will be required to forward commission's proposed agenda. This proposed mechanism is fee based and loosely modeled after the telecommunication industry. Whether this type of structure can actually work remains as one question. The other is that based on the fact that the U.S. Government already collects lease bonuses, rents and royalties from offshore drillers. Why not incorporate the fees for the industry to self police themselves into the already existing pay structure? These payments totaled $2.3 billion in 2010 and over $9 billion in 2009. It’s altogether possible and widely hinted that the federal government used these funds for a wide variety of uses that didn’t include any regulation. Who is to say that it would change with the proposed new fees under a new structure or the existing lease, rent, royalty system?

2) With oil hovering just under $100 dollars per barrel, it would be logical that there would be some urgency to return to offshore drilling under a tighter regulatory environment. The lack of urgency to push forward with increased safety, the prevention of accidents, and response capabilities doesn’t seem to be there, which is surprising.

3) Speaking of safety, the fatality rate at U.S. based offshore facilities was four times higher than those in European waters from 2004 – 2009. This despite the fact that many of the same companies operate in both places. The committee did a kind of “fly by” on the statistics but they remain troubling anyway. Has the worker safety oversight on these rigs slipped that much? Is this slippage an indication of a completely cavalier attitude toward safety by companies operating in U.S waters? That would not necessarily be a surprise but the topic needs further examination.

It seems that many of the issues which weren’t covered in the commission’s report will likely be settled in numerous over the next several years. There are issues which can’t wait, however, relating to the safety of rig workers and to offshore drilling in general.