Incentivizing risk: the road to the Deepwater Horizon disaster


At the Netroots Nation conference, Kate Sheppard of Mother Jones magazine led panelists David Pettit, Bob Cavnar, and Van Jones in a diagnosis of the regulatory and legislative failures that made the Deepwater Horizon disaster possible.


Post by Alexa Jay

CSW was at the Netroots Nation annual conference in Las Vegas from July 22 – 25 — a gathering of progressive voices working to bring technology to bear on influencing the public debate.  The conference is in its fifth year, and has enjoyed enormous success as a forum for thousands of progressive activists to exchange ideas and share strategies.  We’ll be reporting on the climate and environmental panels we attended and other discussions that took place. Note that keynote sessions and many panels are now web-archived at

In the wake of the disaster, we’ve seen legislators wringing their hands about corporate irresponsibility and corruption at the Minerals Management Service, but not much talk about the government policies that set the stage for risky deepwater drilling in the first place.  Many such discussions of the culture of complacency among regulators have overlooked the legislative history that allowed deepwater drilling, one that has missteps dating to the 1970s, said David Pettit, a senior attorney with the Natural Resources Defense Council. 

Setting the stage for deepwater drilling
The Outer Continental Shelf Lands Act of 1953 (OCSLA) set the legal framework for offshore drilling in the Gulf of Mexico, authorizing the Secretary of the Interior to lease those lands for mineral development.  The Act was amended six times between 1978 and 1998 in response to changing issues, and remains the foundation of offshore governance today.

The 1978 amendments to OSCLA provided guidelines for implementing the offshore oil and natural gas development program, and the 1982 Federal Oil and Gas Royalty Management Act created the Minerals Management Service within the Department of the Interior to manage natural gas and oil production on the Outer Continental Shelf. 

Oil companies argued that deepwater drilling in the Gulf of Mexico could get the US off of foreign oil, asking for taxpayer subsidies to overcome prohibitive costs, said Pettit.  The Deepwater Royalty Relief Act of 1995 instituted a tremendous break on royalties from Gulf drilling in waters at least 200 meters deep, creating an enormous incentive for companies to drill on the Outer Shelf.  The provisions of the Act expired in 2000, and royalty relief is now determined on a lease-specific basis.

A number of environmental reviews by local, state, and federal agencies are required before projects can proceed.  Major federal environmental legislation affecting offshore mineral development includes the National Environmental Policy Act, the Clean Air Act, the Coastal Zone Management Act, the Endangered Species Act, and the Clean Water Act.  But as Pettit said, the permitting process was a joke for some of these wells, including the habit of exempting wells from federal regulation under a “categorical exemption.”  The culture at MMS was “drill baby drill,” said Pettit, because the service collected money from the leases.

In contrast, drilling off of Alaska requires a much higher level of environmental review.  But this is the system we have been living with in the Gulf of Mexico, Pettit said, and “everyone is complicit in this system…The regulatory and legislative failure that we’re seeing is the failure to have a rational energy policy.”

Bob Cavnar, a thirty-plus year veteran of the oil and gas industry and founder of the blog The Daily Hurricane, said that the situation we find ourselves is “indicative of where we are in our lack of energy policy over the past 40 years; the fact that we’re in 5,000, 10,000 feet of water drilling for oil, just essentially for our own survival is a real indictment of our leaders’ lack of courage in establishing what we need long term, and that’s energy security.”

Cavnar said that what many people don’t understand is that 400-500 wells in the deepwater of the Gulf of Mexico provide 80% of oil production in the Gulf, with total Gulf oil production providing about 30% of our daily energy needs.  Because the stakes are so high for the deepwater wells, he said, “that’s why we need to get this right.” 

What went wrong?

Cavnar compared a rig explosion to an airplane crash in that multiple safety systems are built in, and multiple bad decisions have to be made for things to go wrong.  “The goal of drilling these wells is to use design barriers so that you never have to use the blowout preventer.  Looking back at all the steps over the past year and a half when this well was being designed: casing problems, poor maintenance and modifications of the blowout preventer that made it almost unfixable on the ocean floor, and complacency among those who are very good at this…”

What comes next?

After the disaster, President Obama imposed a six-month moratorium on exploration drilling in waters of more than 500 feet in the Gulf of Mexico, which affected 33 drilling rigs.  A federal judge issued a preliminary injunction against the ban, but that decision is being appealed to the Fifth Circuit.  The administration issued a wider ban earlier this month, which applies to any deep-water floating facility with drilling activities. Opponents of the ban argue that it unfairly assumes all deepwater wells are unsafe, and will cost jobs. 

Van Jones, a pioneer in human rights and the clean-energy economy and the former green jobs advisor in the Obama White House, said “the moratorium proposed is nowhere near long enough to do what needs to be done.  Until we can answer the question—what happened on the Horizon that permitted every safety system to fail?—then we can’t lift the moratorium,” Jones said. 

“The argument about employment is really aggravating,” said Jones.  “We are talking about a moratorium of 33 wells out of thousands.”  The fishing and hospitality industries are much more important in the Gulf region, and those are the industries that are being devastated by the spill, he said.

Jones said that while the argument is that we need to be energy independent and therefore must drill on the Gulf Coast, the reality is that “we have a swarm of multinational corporations drilling on those coasts to sell that oil anywhere they want to.  It’s a global market.  We have got to push harder on this idea of real energy independence.”

On Friday, July 30, the House of Representatives passed the Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act of 2009, its version of oil spill response and energy legislation.  But the future of the legislation is uncertain; its counterpart in the Senate appears to be stalled, with several other items on the calendar and the August recess fast approaching. 

The House also passed H.R. 5851 on July 30 by a 315-93 vote, granting whistleblower protection rights to offshore oil and gas workers. 

More CSW posts from Netroots Nation 2010:

Al Franken: “Net Neutrality is the First Amendment Issue of Our Time” 

<a href="" title="Environmental Conflict and Climate Change: The Grassroots vs ‘Big Green’
“>Environmental Conflict and Climate Change: The Grassroots vs ‘Big Green’

<a href="" title="'Merchants of Doubt' responsible for climate confusion – book review
“>‘Merchants of Doubt’ responsible for climate confusion – book review

<a href="" title="Netroots Nation: On holding the Obama Administration accountable on climate and energy
“>Netroots Nation: On holding the Obama Administration accountable on climate and energy

<a href="" title="Netroots Nation Day 2: Separation of oil and state
“>Netroots Nation Day 2: Separation of oil and state

Supporting Science, Benefiting Society

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