Will BP Spill Lower Risk of Deepwater Drilling?

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U.S. Coast Guard / Reuters

Fireboat response crews battle the blazing remnants of the Deepwater Horizon oil rig near Louisiana on April 21, 2010

For the oil industry, for a long time, there was almost no such thing as too deep. Then came Deepwater Horizon. In September 2009, the Transocean rig drilled the deepest well in history, through more than 35,000 ft. (10,700 m) of water and rock. The following year, Deepwater began drilling the Macondo prospect in the Gulf of Mexico for BP — and we all know what happened on April 20, when the rig was destroyed by a catastrophic blowout, unleashing the biggest oil spill in U.S. history. "For the past 20 years, there was rapid movement by the oil and gas industry to drill deeper and deeper and in riskier and riskier areas of the Gulf," says Bob Graham, co-chairman of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. "On April 20, after a long period of rolling the dice, our luck ran out."

The question is whether this means the Deepwater tragedy will roll back the multidecade-long march by the oil industry into deeper and deeper water. The commission's final report, released on Tuesday in Washington, says the blowout and subsequent spill were not due to the mistakes of a single company. Instead, the commission, which has spent months investigating the spill, makes the case that it happened because of a combination of failures by all the companies and contractors drilling the Macondo well as well as the government regulators who should have been overseeing them. This wasn't simply the fault of BP or the former Minerals Management Service, the government agency that oversaw offshore drilling. This was the result of what Graham calls the "illusion of inevitable success" that accompanied the rapid expansion into deepwater drilling, despite the risks — and it won't be easy to fix. "There are systematic problems in the industry that need to be addressed," said Frances Beinecke, head of the Natural Resources Defense Council and a member of the spill commission, speaking to TIME earlier. "We're going to need much more aggressive action by industry and by the Interior Department."

To be sure, deepwater drilling isn't going away. The easy finds onshore — in the U.S. and throughout the rest of the world — have mostly been claimed or exhausted, and today nearly all of that territory is controlled by state-owned companies like Saudi Arabia's Aramco or Russia's Gazprom. As big as major oil players like BP seem to be — the corporation had revenues of $239 billion in 2009 — they're small in comparison with the state companies, which are now responsible for more than 75% of global crude production. If international oil companies are going to keep growing — and avoid the fate of historic firms like Amoco that have been swallowed up by competitors — they need to tap into offshore resources found in deep or even ultra-deep water. There's no doubting the ability of oil companies to drill ever deeper — the technology on rigs like the Deepwater Horizon is comparable to that of NASA. The question the Gulf spill has raised is whether it can be done safely — and what policies need to be put in place to make that happen. "If dramatic steps aren't taken, at some point in the coming years, another failure will occur," says Graham.

What's more, those in the oil industry, unsurprisingly, are not convinced. They argue that it is hardly believable that one major spill from a well drilled by one company means that the entire industry has a problem that demands systematic change. And if any company was going to have a disaster, it was BP, which has a history of safety problems. In 2005 a massive explosion rocked BP's Texas City refinery, causing an inferno that killed 15 people and wounded more than 170, and in 2009 the Occupational Safety and Health Administration fined BP a record $87.4 million for more than 700 violations at Texas City. Critics say former CEO John Browne, who resigned in 2007, placed cost-cutting above safety, subcontracting out work that other oil companies like Exxon keep in house. "Sixty years and 40,000-plus wells drilled in the Gulf suggests the industry knows what it's doing," says John Hofmeister, a former executive at Shell and the author of the book Why We Hate the Oil Companies. "This was an incident that took place on one rig that I think was badly managed."

But BP wasn't alone aboard the Deepwater Horizon. The commission's report also details errors by Halliburton, the energy-services company that was responsible for cementing the well, along with mistakes by the Transocean crew aboard the Deepwater Horizon, which failed to detect the signs of an impending blowout until it was too late. "The fact that the three major players in this industry all made questionable decisions tells you that it's systematic," says Stanley Reed, co-author of a book on the spill called In Too Deep.

So will deepwater drilling face new restrictions? The spill commission's report has a laundry list of suggestions, including the creation of an industry-sponsored safety organization modeled after the Nuclear Safety Institute and the creation of an independent safety agency within the Interior Department. That seems realistic — in July, four of the biggest oil companies announced a $1 billion rapid-oil-spill-response system that could counter a Deepwater Horizon–like underwater blowout. The commission also recommends that Congress raise the liability cap for oil-spill damages from its current level of $75 million (it was unable to agree on how high the cap should go), and urges industry to adopt "safety case" approaches to drilling new wells that emphasize risk analysis. "This is a fundamentally hopeful message," says William Reilly, co-chairman of the commission and the former head of the Environmental Protection Agency. "This is a problem that can be managed — and it's in the interests of government and industry to manage it."

But with the spill receding from the headlines, some of the proposed regulations are sure to be watered down. The oil and gas industry is already fighting government attempts to strengthen regulation. At a speech at the Newseum on Jan. 4, American Petroleum Institute president Jack Gerard called for lighter taxes on energy exploration and the opening of offshore areas in the Atlantic and Pacific and Arctic Alaska to drilling. Over the past few months, the industry has rebelled against the Interior Department's slow pace of granting new drilling permits in the Gulf, threatening that companies will move rigs elsewhere, costing American jobs. The newly Republican House is on its side — the GOP has said it will push for deregulation — and rising gas prices in the coming months could give drilling further momentum. "Companies need to know they can get access to the domestic resources where oil and natural gas can be developed," Gerard said. "But we also cannot keep the industry on indefinite hold while the regulatory process is improved."

But the commission report demonstrates that unless systematic changes are made by oil and gas industry — and by the regulators who oversee it — another Deepwater Horizon is all but inevitable. Offshore drilling will never be perfectly safe — digging thousands of feet below the floor of the ocean while trying to corral millions of barrels of oil is technically challenging under perfect conditions. But as even Reilly admitted, "The real reason we're in deepwater is that's where the oil is." Companies will continue to push the technological boundaries in offshore drilling, opening up new territory off the coasts of South America, Africa and even Cuba — a thought that should worry Gulf Coast residents. The drilling won't stop — here or abroad — but unless changes are made, it still won't be safe enough. "The nation suffered a colossal disaster with the oil spill," says commission member Beinecke. "The question is, What will we learn from it?"