sri-advisor.com
where checking accounts rebuild communities
Back to homepageInstitutional ReportsSRI Financial Professionals DirectoryToolsNewsSRI Performance and TrendsAbout Us   
News


January 14, 2011
Oil Spill Commission Submits Final Report
    by Robert Kropp

The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling identified failures of corporate governance by BP and its contractors, and strongly recommends rigorous legislative and regulatory oversight.


The full report of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling was published on January 11, and its findings reflect those arrived at in an advance chapter issued last week.

The Commission, whose formation was announced by President Obama last May, stated in its report that the explosion of the Deepwater Horizon oil rig "could have been prevented," and "can be traced to a series of identifiable mistakes made by BP, Halliburton, and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry." The explosion killed 11 men on the rig and spilled more than four million barrels of oil into the Gulf of Mexico.

"Complex systems almost always fail in complex ways," the Commission stated, quoting the findings of the investigation of the loss of the Columbia space shuttle. The ongoing efforts to discover sources to satisfy the nation's addiction to fossil fuel led BP to drill "the Macondo well under 5,000 feet of Gulf water, and then over 13,000 feet under the sea floor to the hydrocarbon reservoir below." However, "Deepwater energy exploration and production," according to the report, "Involve risks for which neither industry nor government has been adequately prepared."

"They can and must be prepared in the future," the report continued.

As the technology that has allowed for such deepwater drilling has advanced, remedies for addressing spills has not kept pace, the Commission asserted. "Government must close the existing gap" in technology, regulation, and practices, the report stated, "And industry must support rather than resist that effort."

According to BP's 2009 Sustainability Report, "Our goal of 'no accidents, no harm to people and no damage to the environment' is fundamental to BPís activities. We work to achieve this through consistent management processes, ongoing training programmes, rigorous risk management and a culture of continuous improvement."

The Commission, on the other hand, referring to a series of health and safety violations by BP that date back to 2000, found that "BP's safety lapses have been chronic." Following an explosion at BP's Texas City refinery in 2005 that killed 15 workers, an independent panel concluded that "BP was not investing leadership and other resources in managing the highest risks."

"The pervasive riskiness of exploring for and producing offshore oil and gas does not explain the extent to which approaches to safety differ among companies" and locations, the Commission observed. "From 2004 to 2009, fatalities in the offshore oil and gas industry were more than four times higher per person hours worked in US waters than in European waters, even though many of the same companies work in both venues."

Since the Gulf disaster, the Commission found, the US Department of the Interior has taken steps to improve the regulatory oversight of deepwater drilling. However, given the widely publicized problems at the Department's Minerals Management Service (MMS) that have come to light since the explosion, "A more comprehensive overhaul of both leasing and the regulatory policies and institutions used to oversee offshore activities is required," according to the report.

The independence and integrity of government entities responsible for the oversight of the oil and gas industry must be assured, the Commission stated, and the resources needed to ensure robust oversight must be provided. The strategies used by such entities must "keep pace with a technologically complex and rapidly evolving industry," the report continued.

In addition to improved regulatory oversight, the Commission recommended that a self-policing safety organization for the oil and gas industry be formed that is credible; the "industry cannot persuade the American public that it is changing business-as usual practices if it attempts to fend off more effective public oversight by chartering a self-policing function under the control of an advocacy organization" such as the American Petroleum Institute (API), the report stated.

To counter the corporate governance failures such as those exhibited by BP in the Gulf disaster, the Commission recommended "Strong board-level support from CEOs and boards of directors of member companies for a rigorous inspection and auditing function." Such functions must include the benchmarking of safety and environmental practices against globally recognized best practice.

On a fundamental level, the report found, "Scientific understanding of environmental conditions in sensitive environments in deep Gulf waters, along the regionís coastal habitats, and in areas proposed for more drilling, such as the Arctic, is inadequate." The environmental destruction of Louisiana's bayous and wetlands has gone on for decades, to accommodate oil exploration.

Restoration on the scale required to create a sustainable landscape in Louisiana and elsewhere "will require coordinated federal and state actions, a dedicated funding source, long-term monitoring, and a vocal and engaged citizenry, supported by robust non-governmental groups, scientific research, and more," the report continued.

In a
press conference held to announce the submission of the report, former Senator Bob Graham of Florida, Co-Chair of the Commission, noting that the vote of the seven members of the Commission was unanimous, said, "The government has an obligation to respond when trust is abused." The report "Unveiled systemic failures within the oil and gas industry and within the regulation by the government by that industry. Our government let it happen. Our regulators were consistently outmatched," he said.

"These mistakes amounted to a significant failure of management," he continued, and "Revenue trumped safety as a priority of the Department" of the Interior. "Science has been virtually shut out. We need broader consultation with those who have the expertise."

Co-Chair William Reilly said, "To Congress, we say that it is time to exercise serious oversight, which has not been characterized by previous Congressional responses."

"Industry needs to pick up its own game," Reilly continued. "Our recommendations come from the actions of other high-risk industries after their own catastrophes. The oil and gas industry needs to draw the obvious consequences."

Referring to those within the industry who were "revolted" by the Commission's finding that problems were systemic within the industry, Reilly said, "In order to believe that this is not a systemic problem, one has to believe also that Halliburton would only have supplied faulty cement to BP, or that Transocean, on any other rig but a BP rig, would have detected gas rising in the drill pipe."

"Irrespective of whether industry accepts our conclusion that this is a systemic problem," he added, "It seems to be indisputable that the solution to the problem must be industry-wide."

 

 
Home
| Reports | SRI Financial Professionals Directory | Tools | News | SRI Performance and Trends | About Us | Contact
© SRI World Group, Inc. - All rights reserved
Terms of use - Privacy Policy - OneReportTM Network