A Stacked Deck: The Presidential Commission on the Gulf of Mexico Oil Spill

The definition of 'Optimism' is that all is going to turn out well.

By Tony Munoz 2013-01-04 15:18:00

(A Crude Awaking –2)

There is not a snowball's chance in hell the US government is going to lift the ban on drilling by November 30, 2010. First, the ‘National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling’ is made up of nothing more than high-profile environmentalists. The committee’s co-chair is anti-drilling former governor and retired US Senator of Florida, Bob Graham. William K. Reilly, co-chair, is the former administrator of the EPA and ex-president of the World Wildlife Fund. Frances G. Beinecke is the current president of the National Resources Defense Council (NRDC), the nation’s most powerful environmental group, a place where she has worked for more than 35 years. She is also a member of World Resources Institute and on the committee for the U.S. Climate Action Partnership as well as being member of the Energy Futures Coalition. So, how are you doing so far?

Let’s examine the rest of the deck. Please allow me to introduce Mr. Donald Boesch, president for the University of Maryland Center for Environmental Science, a native of Louisiana whose entire life’s work has been dedicated to studying the long-term environmental effects of oil and gas development on the US coastline. Terry D. Garcia, the Executive Vice President of the National Geographic’s Mission Programs ,who also led the implementation of the Exxon Valdez Oil Spill Restoration Plan for Prince William Sound. Cherry A. Murphy, the Dean of the Harvard School of Applied Sciences, member of more than 80 national and international scientific advisory committees, including the National Research Council. And last, but not least, Frances Ulmer, Chancellor of the University of Alaska Anchorage. She is a member of the Aspen Institute’s Commission on Arctic Climate Change, on the board on the Alaska Nature Conservancy, and a distinguished member of the Union of Concerned Scientists. She also served on the Special Committee of the Exxon Valdez Oil Spill Claims Settlement.

Horse thieves and bank robbers usually get a vigilante mob throwing a rope over an oak branch, but like in all Western movies, the hero sheriff would arrive on the scene just in time to save the scoundrels from their imminent doom. The Presidential Committee on the GOM Oil Spill is a political lynch mob, pure and simple. And, they are hardly what would be considered a constitutional “jury of your peers.” While each member has explicitly stated their designation is by no means a signal, rest assured the OCS is now under a full and comprehensive environmental examination. A vibrant offshore oil industry and a healthy Gulf Coast economy are not things that come to mind as this presidential commission of environmentalists goes about its business.

As the moratorium continues, the oil industry is packing its bags and moving overseas. At this moment, rig counts are down 71 percent, dropping from 56 to 16 in the OCS. Restarting oil production will be a long and arduous process. And, just because the administration allows drilling again doesn’t mean the infrastructure will be in place. Restarting exploration and production will be a costly endeavor especially with assets and personnel now deployed overseas. Meanwhile, the thousands of unemployed rig workers and offshore support companies are in for a long and painful wait before Salazar and the presidential commission releases their collective grips on the Gulf Coast oil production.

Ken Salazar- “The Days of Big Risk Are Over”

Secretary Salazar made it clear recently that the death of 11 men on the Deepwater Horizon and an estimated 4.9 million barrels that spilled into Gulf waters have forced the government to raise the bar on industry safety practices and environmental protection throughout the Exclusive Economic Zone (EEZ). Also, each and every CEO with operations in the EEZ will have to sign a certified corporate document stating that rig safety operations and worst case scenario emergency plans are in place.

According to the administration, BP’s lack of preparedness and the previous administration’s exemption from addressing worst case scenarios is ample reason to close the OCS until each and every well operation has been inspected and approved. But, with nearly 50,000 oil workers and another 150,000 support workers out of work in an already collapsing Gulf Coast economy, it will be impossible for the Gulf Coast to escape complete and utter economic devastation.

However, the International Energy Agency (IEA) said there will be little impact on oil prices due to the moratorium because the loss of an estimated 82,000 barrels per day (bpd) from the Gulf will be offset by other oil production elsewhere in the US. The net effect loss will be just 26,000 bpd—a small amount considering the IEA predicts the US to produce 5.37 million bpd in 2011. However, the US Energy Information Agency (EIA) reports that the US imported 4.7 billion barrels or 58 percent of its oil consumption in 2009, at a cost of over $400 billion. That’s over $1 billion dollars per day.

As the US economy attempts to catch the winds of recovery, closing down the OCS and importing more oil doesn’t make a bit of sense. The cost of the 26,000 bpd loss in US production creates another 9.5 billion barrels of required imports at a $7.6 billion cost added to the deficit column, based on $80 per barrel. However, the actual impact to the economy in terms of job losses, home foreclosures, and failed businesses cannot be calculated. And, the cost of human suffering due to the oil spill and moratorium is immeasurable. The Gulf Coast is now a culture in extremis.

As oil operations subside, the industry is moving on to Africa, Southeast Asia, offshore Brazil and other markets where hydrocarbons can be found. But, after the oil companies are gone, the re-mobilization cost of rigs, boats and personnel is quite frankly off the charts. Besides, what CEO wants to return to unlimited liability and potential jail time for causing an oil spill? Will the GOM ever return to normal production? Realistically, it could be many years from now, which is a worst case scenario for coastal economies and its citizens.

In the meantime, Salazar and the presidential committee will raise the bar on the industry, launch a new environmental analysis of the Gulf, cancel all oil and gas leases in the GOM and the Arctic Ocean, rebuild a new independent agency, formerly known as the MMS, put Michael Bromwich, former Inspector General of the Department of Justice to spearhead the administration’s reforms and implement a whole new series of inspections of oil rigs working in the GOM.

“The moratorium and reforms have drawn fire from powerful interests,” Salazar said. “But, make no mistake, our country needs reforms and we intend to deliver them. We will hold the industry accountable and build the strongest and safest offshore energy development plan in the world.”

As this nation sinks deeper into debt due to foreign oil, and watches more foreclosures and more job losses impact an already anemic economy. We should be mindful of the oil company CEOs testifying before congressional hearings on the spill saying the BP operation was an aberration of industry practices. Perhaps, these same CEOs can again testify before the impartial presidential committee of environmentalists to persuade them that oil drilling is clean and safe in the OCS. Good luck.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.