Moratorium Won’t Reduce Drilling Risks By JOE NOCERA

June 25, 2010
Moratorium Won’t Reduce Drilling Risks By JOE NOCERA
“This case asks whether the federal government’s imposition of a general moratorium on deepwater drilling for oil in the Gulf of Mexico was imposed contrary to law. Before the Court is the plaintiffs’ motion for preliminary injunction. For the following reasons, the motion is GRANTED."

So began a stinging 22-page decision, issued this week by a Federal District Court judge, Martin L. C. Feldman. He was rejecting, pretty much out of hand, the Obama administration’s plan to place a six-month moratorium on all drilling projects in the Gulf of Mexico. It would have amounted to a shutdown of 33 deepwater rigs, the kind that can drill the deepest and are the most complex to operate — and the kind that can cost well over $500,000 a day even when they’re just sitting idle.

The plaintiffs consisted of a group of companies that make their money servicing gulf drilling operations; they were led by a shipping company, Hornbeck Offshore Services, which employs 1,300 and has spent nearly $700 million in the last five years building a new generation of ships for use in the gulf. “We saw this as putting our Gulf of Mexico business model at risk,” said Samuel Giberga, the company’s general counsel.

But he also believed that the administration’s edict violated the law. The secretary of the interior, Ken Salazar, had failed to take into account the enormous economic pain that would be inflicted on the gulf region by such a moratorium, as he was required to under the law, Hornbeck argued. The administration was punishing deepwater drillers that had complied with all the regulations surrounding deepwater drilling — and had gotten their permits fair and square. Right after the spill, Mr. Giberga told me, a government SWAT team had inspected all the other rigs — and found them to be safe. The Deepwater Horizon disaster notwithstanding, the federal government had failed to articulate any good reason why all the other rigs in the gulf had to be stopped as well.

And Judge Feldman agreed with Hornbeck on every count. Concluding that the decision to impose the moratorium was “arbitrary and capricious,” he wrote, “An invalid agency decision to suspend drilling of wells in depths of over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the gulf region, and the critical present-day aspect of the availability of domestic energy in this country.”

Over the next few days, three things happened, all of them completely predicable. The Interior Department vowed to appeal. Gulf state politicians, starting with Bobby Jindal, the governor of Louisiana — whose state has suffered tremendously as a result of the BP accident — pleaded with the federal government to drop the appeal and allow drilling to continue. And environmentalists derided Judge Feldman’s decision.

“This is the Ninth Circuit, which is the go-to court for the oil and gas industry,” said Elgie Holstein, the oil spill response coordinator for the Environmental Defense Fund. “I fully expect it to be overturned on appeal.”

Robert F. Kennedy Jr., the president of Waterkeeper Alliance, told The Mobile Press-Register that drilling deepwater wells right now, “when we don’t even know what caused this accident, seems insane.” He added, “I don’t think anybody responsible would advocate more drilling right now.” And so on.

A simple six-month drilling moratorium. It sounds like such a sensible, obvious, uncontroversial thing to do in the wake of the worst environmental disaster in this nation’s history, doesn’t it? Turns out, it’s anything but.

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As a percentage of the world’s oil production — some 84.5 million barrels a day — the 1.75 million barrels a day that is extracted from the Gulf of Mexico is not a huge number. (That’s why oil prices haven’t risen as a result of the Deepwater Horizon disaster.) But in terms of the country’s domestic production, it is extremely important. According to Gibson Consulting, a third of all United States oil production comes from the Gulf of Mexico.

What’s more, virtually every new well being drilled in the gulf is a deepwater well — because, after all, that’s where the oil is. “Oil from shallow waters peaked in the 1990s,” said Cutler Cleveland, a professor of geography and environment at Boston University. “And deepwater peaked five or six years ago. So now we are moving into ultra deepwater — over 5,000 feet.” And, he adds, 80 percent of the reserves that remain in the gulf are either in deep or ultra deepwater.

So the first point is: Until that glorious day comes that our cars are fueled by batteries and our homes are heated by solar power, we need as much domestic oil as we can get our hands on, oil that exists in the deep waters of the Gulf of Mexico. Shutting down drilling in the gulf — even temporarily — means we’ll be importing even more oil from other countries than we already do.

Nor is it clear, if the moratorium went into effect, the pullback would be all that temporary. For one thing, the moratorium is contingent on a special commission making yet more safety recommendations in six months, but there is no guarantee they’ll be done by then. Meanwhile, there are only so many floating rigs in the world, and Brazil, for instance, has just embarked on a $200 billion drilling program. (You read that right: $200 billion.) It takes a month to move an idle rig from the Gulf of Mexico to Brazil, where it will likely stay for years. So a six-month moratorium would quite likely have far greater effect on American oil production that it would seem at first glance.

Which also leads to a great irony: importing more oil via tankers will actually create more risk, not less. Between the 1970s and the Deepwater Horizon accident, a grand total of 1,800 barrels of oil were lost from rig accidents — an average of 45 barrels a year. That is an astonishing record. Ken Arnold, an expert who consulted with the Interior Department right after the BP spill — and a big critic of the moratorium — told me that much more oil is spilled in tanker accidents annually than from drilling rig accidents.

What’s more, he added: “The oil in those tankers was produced somewhere — somewhere that most likely has less regulation and less oversight than we have. We are not lessening the chance of a spill; we’re just transferring that risk to Nigeria and Brazil. We are not helping the world. We are just saying, ‘Brazil, we prefer to despoil your beaches, but not ours.’ ”

Then there are the battered gulf economies. It is easy enough, sitting here in New York, to argue that we should shut down oil drilling in the Gulf of Mexico for as long as it takes, to be absolutely sure we’ll never have another accident like the one we’ve just had. I hear Rachel Maddow making that point most every night these days.

But a shutdown doesn’t really affect our daily lives up here on the East Coast. In the gulf, one mainstay of the economy — fishing — has already been devastated. Do we really want to finish off the rest of the Gulf Coast economy by sidelining its other pillar, oil drilling? There is a reason politicians like Mr. Jindal are pleading for drilling to continue, despite the spill’s terrible effect on his state. They’re desperate. When an airplane crashes, and several hundred people die, the government doesn’t ground every airplane until it is sure all airplanes are safe. It would be too disruptive to the economy. Shouldn’t the same logic apply here?

What has become obvious in the aftermath of the accident is not so much that offshore drilling — even deepwater offshore drilling — is inherently unsafe. It is, certainly, risky, but so are many activities, like mining or flying an airplane. One reason there have been so few accidents over the years is that the incentive for doing things safely is enormous: mistakes can lead to death.

None of which is to say that the Deepwater Horizon disaster hasn’t pointed to problems with drilling, or that new safety measures don’t need to be added. Most of all, it shows the utter inadequacy on the part of both industry and government in containing accidents when they do happen. Precisely because of the industry’s incredible safety record over the years, everyone got complacent. But a six-month moratorium isn’t going to fix that either. What are needed are new ideas that can be debated and then enacted into regulation. One appealing idea I’ve heard is that deepwater rigs should be required to drill a relief well at the same time the exploratory well is being drilled. But that would also, of course, increase the cost of drilling for oil in the gulf.

In the end, the real problem with the six-month moratorium is that it allows us to continue to kid ourselves. It helps us create the illusion that, by regulatory fiat, we can make the extraction of fossil fuels a riskless endeavor. But that can never be true. Six months from now, whether or not the Interior Department succeeds getting Judge Feldman’s decision overturned on appeal, deepwater drilling will still be risky. Drilling thousands of feet into water, searching for dangerous natural gas and oil, contained in the earth under immense pressure, is inherently risky.

We would all be better off facing that fact squarely, instead of wishing it away under the guise of a moratorium.