Tag Archives: oil

A Year After the BP Oil Spill- a Slow Recovery, Continued Risk Management Challenges

25 Apr

A year ago last week, and for months afterward, we were bombarded with horrible images of potentially catastrophic proportions.  The Gulf Coast was under siege from the Deepwater Horizon blowout and resultant spill.  Dead or dying waterfowl and sea life haunted our dreams.  Tourists scooped up tar balls from Gulf Shores, Alabama to Pensacola, Florida.  Round the clock news coverage of the economic devastation was heaped unexpectedly on the gulf coast.   Cleanup crews deployed nearly useless 20th century solutions to a 21st century problem.  Hapless oil executives spun their stories and federal government agencies did too little, too late.  And the problem kept growing while the oil kept spewing from the blown out well, miles below the surface.

Risk Control Lacking

Just after the spill occurred, I wrote a piece on the lack of risk management protocols  and oversight that matched the nature of the work and how it was inevitable that this type of event would occur.

“I have no doubt that there has been a central breakdown in process risk management, commonly used by organizations to establish procedures to safely manage the greatest of uncertainties of its daily operations.  This means that if a company is going to drill a mile under the Gulf of Mexico, they should FIRST make certain that all possible failure scenarios are identified, evaluated, tested and implemented, before that first barrel of oil is extracted…While it’s vital that 24 hour protocols be applied to day-to-day activities that may be a threat to environmental well-being, unforeseeable events involving human error or equipment failure must be managed too… inadequate steps have been put in place to 1) evaluate “worst case” impacts associated with catastrophic failures of equipment or systems; 2) establish policies and program to mitigate short and long-term environmental risk factors and 3) assure that there are financial cushions (cleanup and reclamation bonds, for instance) that continue to hold those liable before they can run or hide.”

Spring turned to summer and finally on July 15, 2010 the leak was stopped after it had released about 4,900,000 barrels of crude oil, the well was capped.  But the troubles were far from over and as I reported shortly before the well was finally capped, recovery takes time. When writing about the possibilities of a rebounding gulf coast (both ecologically and economically), I spoke of resiliency, the “structural issues” that appeared in the oil exploration, approval and development process, and the steps needed to nurture a full recovery.

The current, devastating Deepwater Horizon oil spill and ecological crisis in the Gulf of Mexico presents a great set of uncertainties and human-induced risks not realized before in terms of scope and magnitude…Ecosystems are dynamic and ever-changing.  This changing dynamic flow continues its natural cycles and fluctuations at the same time that it continues to recovery from impacts of spilled oil.  As time passes, separating natural changes from oil spill related impacts becomes harder to distinguish.  So time will tell, and after the well is finally plugged (and it will be plugged) and the last drop of oil spills, the long term ecological “rebound” will begin.

Then the fingers started pointing, lawyers got involved, congressional testimony began and yielded few results.  Few companies claimed immediate responsibility nor were they held accountable.  BP said that they would pay “all legitimate claims”.  But that promise seemed hollow to those immediately affected, and the restitution payments flowed like the oil drifting on the surface of the gulf waters.  The status of claims paid can be found in this interview with U.S. Claims Administrator Ken Feinberg, but in a nutshell roughly 25% of the $20 billion set aside by BP has been paid out.

Government Call for Better Risk Management

On January 5, 2011, White House National Commission convened to review the oil spill released a final report detailing faults by the companies that led to the spill.  The report noted that “Better management of decision-making processes” within BP, Halliburton and Transocean (the three key players in this ordeal), “better communication within and between BP and its contractors” and “effective training of key engineering and rig personnel” would have prevented the blowout.  The panel also noted a key breakdown in communicating with government agencies, which did not have “sufficient knowledge or authority to notice these cost-cutting decisions”.

The record shows that without effective government oversight, the offshore oil and gas industry will not adequately reduce the risk of accidents, nor prepare effectively to respond in emergencies. However, government oversight, alone, cannot reduce those risks to the full extent possible. Government oversight … must be accompanied by the oil and gas industry’s internal reinvention: sweeping reforms that accomplish no less than a fundamental transformation of its safety culture. Only through such a demonstrated transformation will industry—in the aftermath of the Deepwater Horizon disaster—truly earn the privilege of access to the nation’s energy resources located on federal properties.

Economy and Ecology- Rebounding…Slowly

Flashing forward to this last week, on the economic side, only seven of the 34 deep water rigs operating at the time of the explosion are in operation (due to the moratorium that was put in place by the Obama Administration last year).  Following the sunset of that moratorium last fall, it’s been reported that off shore production may ramp up to about 15 or 20 by the end of the year, meaning the addition of the thousands of oil industry and related service jobs that have been lost since the spill.  A Wall Street Journal article last week highlighted the struggles that small businesses (small marinas, seafood restaurants, commercial fish operations etc) have had in the past year.

A BBC report last week noted that “scientists have warned that it is too soon to attempt to offer a considered assessment on what impact the Deepwater Horizon oil spill, the largest of its kind, has had on the Gulf of Mexico’s wildlife.   In short, they said, nature did not work in such a way that the full picture will present itself within just one year.  It’s clear that given the rate of recovery from the Exxon Valdez spill over 20 years ago that more data will be needed in the years ahead to assess the full extent of the ecological damage done.

But Dr. Jane Lubchenco (Administrator at the National Oceanic and Atmospheric) believed that reports of systems recovery suggest that the health of the Gulf is “much better than people feared”, but the jury was out about what the end result would be.  According to some reports, signs 60 pounds of tar balls still wash ashore daily along the 33-mile stretch of beach that runs near the Interstate 65 corridor near Orange Beach, Ala..  Meantime, one thing I can tell you is that Louisiana Governor Bobby Jindal was plugging gulf coast seafood big time last week on National Public Radio and elsewhere.

Not Out of the Woods, More Work Needed

Progress toward requiring safer drilling, protecting natural resources and compensating victims has been uneven at best.  As reported in an Op-Ed last week, “Without the reforms fully in place, the administration is plunging ahead despite the well-documented inability of industry and government to prevent accidents in deep water. For starters, the federal government needs a better understanding of how operating rigs under the intense pressure of deep water can cause blowout preventers — the so-called last lines of defense — and other critical equipment to fail…. There also should be a more complete picture of whether rig operators have the assets — people, vessels, know-how, and money— to respond to a spill.”

The Op-ed also stated “The Federal government needs a better sense of the risks of offshore drilling and a better process for sharing that analysis with other agencies — the Coast Guard, the National Oceanic and Atmospheric Administration, the Environmental Protection Agency — that play a key role in any emergency response.”  For instance,  the newly created Bureau of Ocean Energy Management has added only 4 new inspectors (now at 60) to cover more than 3,500 drill rigs and platforms in the Gulf.  New monies allocated by Congress may alleviate that serious oversight deficiency, but it will take time, training and education to get new inspectors up to speed.  Meanwhile, inspection and oversight is spread too thin and the oil industry appears to be in no rush to help fund additional inspectors (especially at the same pace they are lobbying at to get more drill rigs operating again in the Gulf).

Photo by alancleaver_2000. (via Creative Commons license)

In the second post on risk that I published last year after the gulf spill, I noted that a continuous risk management process helps organizations understand, manage, and communicate risk and avoid potential catastrophic conditions that can lead to loss of life, property and the environment.  I laid out a typical six-step process to achieve effective risk management and failure mode control.  I also noted ”What will be … fascinating will be the lessons learned and if businesses truly embrace risk management planning and implementation as a central function of business, take it seriously and hold themselves accountable.”

Last week, Bob Dudley the Chief Executive of BP, wrote an opinion letter in the Wall Street Journal.  In the piece, Mr. Dudley indicated that the company was “creating a central safety and operational-risk organization reporting directly to me. This organization has the mandate and resources to drive safe, reliable operations that comply with regulations, and it has the authority to intervene in our operations anywhere in the world. We are also linking the management of employees’ performance and reward directly to safety and to compliance with BP’s standards….We will not use rigs on our projects that do not conform to our standards. We have either turned away rigs or are negotiating for modifications to particular rigs that will bring them up to our standards.”  Dudley also noted that “… around 7% of the world’s oil supplies are coming from the deep water, a total we expect will rise to nearly 10% by the end of this decade. That means we must have better safety technology, more effective equipment and the capability to deal with a blowout in the deep water.”

Summary

The National Commission on the spill and members of industry, academia and Congress have made solid “suggestions” for beefing up the regulatory framework for oil exploration and drilling, including: tougher inspections; higher fees from industry to self-fund more policing programs; greater financial liability for companies that spill into waterways as a means to encourage responsible behavior and to cover accident cleanup and recovery costs.

It appears, looking back, that industry and government have moved in the right direction to address the systemic problems that emerged from the Deepwater Horizon spill and follow-up investigations.  But as the current status clearly shows, I’ve grave concerns about on-going performance and genuine progress in adopting genuine, effective risk management tools, oversight and governance. Until there is 100% assurance that such a system is fully in place, fully staffed, fully operational and with full oversight assurance, I am fearful of a repeat…whether it’s in deep water or in other harsh environments, such as the Arctic.

Meanwhile it’s vital that the U.S. continue expanding the search for alternative forms of land-based fuel and energy and support the funding of alternative, cleaner fuels and greener technologies.

‘Rebound’- Linking Bad Backs, the Gulf Spill, and the Economy Through Sustainability

15 Jun

So, it’s official.  I have a “bad” back.  A very competent neurosurgeon told me the other day that “you have structural issues”.  Indeed I do.  This all started after I went hiking with my family in late 2009 and experienced a burning pain in my legs, followed by numbness and teeth-gnashing lower back pain.  A series of tests ruled out circulatory problems (thank goodness) and other internal stuff.  “How bad is it, Doc?” I asked.  Well, an MRI revealed a bulging disc, mild spinal stenosis and a synovial cyst.  I guess I am not a spring chicken anymore, after all.

The center that I went to get this great news had a great name too-Rebound– and it got me to thinking.  In mulling over the state of our economy and the ongoing oil spill disaster in the Gulf of Mexico, I suggest that those situations are representative of “structural issues” that require therapy of sorts.   The economy appears to slowly be on the “rebound”, while the prognosis for the other (the Gulf spill) will still require more study to determine the full extent of the damage.  Common among these two situations and my back is a call for change, to think more sustainably.  In other words, considering the economy and the environment as linked systems requires a deeper, holistic, de-siloed way of thinking.

By taking a triple bottom line perspective, the “people, planet and profit” elements that constitute sustainability will be better served and long term value realized.  This post is about hope, about renewal and rejuvenation- please read on.

People

The spine is not only the foundation for our entire physical structure but also house the nerves that radiate to each organ and every minute part of the body.  Spinal nerves especially control the functional processes of all our bodily tissues and structures.   My back problems are not so bad that surgery will be involved.  But the experience will require making some adjustments in my exercise routine, losing weight (again!) and stretching more.

The key to back health is in strengthening the “core” muscles- and having the “mojo” necessary to keep on plan and stay motivated, even when things look really, really bad.   If I follow my plan, I expect to “rebound” from my injuries stronger than before.

Profit

In the case of the economy, I have just completed reading “The Great Reset” by Dr. Richard Florida, Professor of Public Policy at George Mason University.  In The Great Reset (http://bit.ly/cDbWWG), Dr. Florida explores the parallels of the current Great Recession to the Long Depression of the 1870’s and the Great Depression of the late 1920’s and 1930’s.  Florida argues that ‘these periods of “creative destruction” have been some of the most fertile, in terms of innovation, invention and energetic risk-taking in history, and this is what sets the stage for full-scale recovery.’  Florida argues that great crises are opportunities to remake or “rebound” our economy and society and generate whole new epochs of even greater economic growth and prosperity.  Among these new forces and energies will be:

  • new consumption patterns
  • new forms of infrastructure that speed the movement of people, goods and ideas
  • ‘mega-regions’ that will drive the development of new industries, jobs and a locally based way of life.

    Image Credit: ProgressOhio

I am also am reading Plentitude, by former Harvard University economist and current Boston College sociology professor Juliet Schor.  Dr. Schors book (http://bit.ly/cnbG8n) argues that society needs to make some big changes from the “business as usual” model of economics.  In a world economy traditionally valued based on gross domestic product (GDP), Dr.  Schor explores the economics and sociology of ecological scarcity (food, water) and rising costs of goods and services (energy, transport).  In addition, she explores the factors that have led to the scarcity in incomes, jobs, and credit.  Plenitude puts sustainability at its core.  The book presents a vision that suggests finding  new sources of wealth, implementing green technologies, and strengthening locally based economies, all of which can lead to a more economically secure, ecologically sensitive and sustainable world.

Both books offer promise that a redirected focus on community-based, environmentally-centric and technological efficiency and innovation can (and must) be the “rebound” catalysts that drive economic prosperity.

Planet

The current, devastating Deepwater Horizon oil spill and ecological crisis in the Gulf of Mexico presents a great set of uncertainties and human-induced risks not realized before in terms of scope and magnitude.  My earlier posts on the Gulf spill spoke to the issue of risk management and contingency planning and how such scenarios can be managed better (Risky Business: Why Better Risk Management Can Protect Lives & the Environment- Part 1 http://bit.ly/aRDeJj).   But this discussion focuses on ecological damage and on resiliency of natural environments.

The 1979, spill from Mexico’s Ixtoc 1 offshore well in the Gulf of Campeche is proof that the environment has a “stunning capacity to heal itself from manmade insults” (http://bit.ly/djoDkO).   This huge spill surprised marine biologists and ecologists in terms of the speedy recovery of the heavily impacted Bay of Campeche ecosystem spreading into south Texas.  However, there are major differences in the depth and location of the Ixtoc and Deepwater Horizon spills, and other natural phenomena that aided in the Ixtoc spill recovery rate.  These differences may not bode well for the Louisiana coast.  Case in point- the Exxon Valdez spill in 1989.  Studies in the mid 2000’s showed that 15 years after the Exxon Valdez oil spill, “some fish and wildlife species injured by the spill have not fully recovered” (http://bit.ly/d2VEaZ).   Researchers noted some uncertainty of what role oil plays in the inability of some populations to bounce back.

Ecosystems are dynamic and ever-changing.  This changing dynamic flow continues its natural cycles and fluctuations at the same time that it continues to recovery from impacts of spilled oil.  As time passes, separating natural changes from oil spill related impacts becomes harder to distinguish.  So time will tell, and after the well is finally plugged (and it will be plugged) and the last drop of oil spills, the long term ecological “rebound” will begin.

Like the distressed economy and like the gulf coast mess, my back will “rebound” to a healthy point that is hopefully sustainable.  Mark my words.  It’s said that “good health is not an event, it’s a lifestyle”.  This holds true whether we are talking about our bodies, the economy or our planet.

Risky Business: Why Better Risk Management Can Protect Lives & the Environment- Part 2

14 May

In my last post, I called out the mining and oil industries, two of the most risk prone resource extraction industries, for lapses in risk management protocols.  In the past week, Congressional testimony over the BP spill has begun, the finger pointing has started- and yet the spill continues largely unabated (see BP calls blowout disaster ‘inconceivable,’ ‘unprecedented,’ and ‘unforeseeable’ http://bit.ly/b6YEHo ).  Rep. Henry Waxman was quoted as saying “This catastrophe appears to have been caused by a calamitous series of equipment and operational failures”.  It appears on initial investigation that BP, Halliburton and Transocean (the drilling contractor) could have proactively checked battery conditions, verified well plugging, weld integrity and electrical wiring, all believed to be contributors to the failure (see “On doomed rig, lapses sparked catastrophe – Reuters http://bit.ly/cjkdTM).

However let me applaud all those who have worked tirelessly to plug the leak.  Correctly, much of the discussion this past week has now shifted to how risk containment and control and proper contingency planning could have been better planned and executed.  So far, there have been many questions asked but few concrete answers- just deflection (http://www.theenergycollective.com/TheEnergyCollective/64685)

OK, enough table-setting, let’s get to it, shall we?

Step 1: The first step in the risk management process is identifying the key, significant routine or non-routine risks a that a business might face.  These risks can occur during operations, maintenance or post operations circumstances

Step 2: The next step in the risk management process is to analyze or assess which of the routine or non-routines risks might have the greatest negative impact on the company, its employees and the environment. In  prioritizing the risks, companies need to determine which of those risk factors identified (be they human health, environment or financial) the company has control over and which ones it does not can create the greatest immediate and long term impact.

Step 3: After assessing and prioritizing each risk, each risk must be evaluated against specific company criteria, health, safety and environment and industry protocols. To complete this step, specific reference criteria needs to be established that  characterizes and scores risks on the basis of scale and severity, probability and frequency of duration, feasibility of mitigation , stakeholder issues and costs. By specifically evaluating possible repercussions of each risk on the company or business objectives based on “reasonably foreseeable” incident scenarios, the company will be better prepared to deal with the outcomes.

Step 4: The fourth step in the risk management process is creating a risk containment, control and long term contingency plan for each potential risk scenario. Based on each risk and its effect on the company’s goals, the risk manager must determine what can be done to treat each risk and plan for each incident . Creating a contingency and treatment plan will require deciding which risks can be avoided and which ones can only be lessened or mitigated with administrative or engineered controls.

Step 5. Simply, implement the risk management and contingency process.  Make sure that employees are trained.  Ensure that both internal and external communication processes and in place. Test the emergency and incident response systems that have been implemented.  Make corrections and continually update the scenario planning.

Step 6: The final and perhaps most vital part of the risk management process is monitoring and oversight.   By keeping the eye on the ball, companies could have likely avoided the coal and oil disasters that occurred last month.  By continually monitoring, reviewing decisions made  and correcting issues that could contribute to catastrophic failures, companies can avoid or mitigate losses to life, property and the environment.  This is likely where the Massey and BP failures occurred.

In summary, a continuous risk management process helps organizations understand, manage, and communicate risk and avoid potential catastrophic conditions that can lead to loss of life, property and the environment.  Risk Management helps organizations:

  • Identify critical and non-critical risks
  • Document each risk in-depth
  • Log all risks and notify management of their severity
  • Take action to reduce the likelihood of risks occurring
  • Reduce the impact on  business, life, and the environment

It all sounds so simple, right? It will be interesting to see what emerges as the investigations into the recent oil and coal disasters continue to unfold.  What will be more fascinating will be the lessons learned and if businesses truly embrace risk management planning and implementation as a central function of business, take it seriously and hold themselves accountable.