Empirical Evidence Provides the Answer

The question of whether drilling can be conducted safely is not a theoretical one. The oil industry has decades of experience drilling safely in hostile environments. In spite of a solid track record, environmentalist always, always, make the same claims and have for decades.  Evidence to the contrary does not deter their rhetoric or campaigns, which probably have more to do with fund raising than serious objections.

In the early 1970s, they opposed drilling in the North Slope of Alaska—Prudhoe Bay—and the construction of an 800 mile pipeline to transport oil. It took an act of Congress to basically send them to timeout so the pipeline could be built. The record of safe operations is not limited to Alaska.

There is an abundance of evidence from the successful operations in the North Sea where winter storms can produce waves exceeding 100 feet. In the mid 90s, oil companies began successful operations off the coast of Nova Scotia in an area called Iceberg Alley. At the time, the drilling rig, Hibernia, was state of the art and designed to operate in a hostile environment where icebergs presented a serious risk. Designing and building Hibernia to deal with those risks cost between $3-$4 billion dollars which at the time was the cost of a nuclear powered aircraft carrier.

A history of successful operations in those areas should have provided a solid foundation for a rule making designed to “promote safe, responsible, and effective drilling activities…while… (protecting) Alaska’s coastal communities and marine environment.”

The rule sent to OMB could best and most cost-effectively accomplish the above objectives if it involved the oil industry and a review of its operating and risk management plans as well as how they have evolved since the 1970s. Oil companies know how well those plans have worked and what gaps need filling. They represent an expert resource to the Department of Interior. And, such a cooperative and collaborative as well as transparent effort offers the best hope for producing a rule that strikes the right balance between environmental and community interests and operating efficiency. In an environment that was less adversarial, environmentalists would have been a productive part of the process but that contentious issues. The just say No philosophy doesn’t work, except in the short run.

While a cooperative and collaborative approach is the best way to develop regulations, it is hard to achieve because of environmentalist intransigence and the risk adverse incentives that influence any agency. There is no obvious downsides to being overly restrictive but there can be a serious downside by prudence. If there is an accident, Congressional hearings would follow, environmentalists would claim that the agency was in bed with industry, and a sacrificial lamb would have to be offered up. That is a poor way for government to operate but it all to often it is the way it does.

No area should automatically be off limits to potential exploration. The moratorium of the Atlantic and Pacific OCS was and has been a political expedient that robbed the economy and coastal
communities of the economic benefits of development. The oil and gas renaissance that is now taking place could have occurred sooner. Decisions should be made on a case by case basis where the environmental risks are subjected to risk-management analyses and then compared to the economic benefits of exploration and production. If the costs of reducing those risks are too high for the oil industry, it will not pursue exploration. In addition, the oil industry realizes that even with the best of standards and plans, accidents can happen. Risk free is an illusion. When accidents do happen, the litigation costs and clean up costs are enormous. Those may be the strongest incentives for achieving a high degree of excellence and safety.

 

This article appeared on The National Journal’s Energy Insiders weblog at http://disqus.com/wokeefe/

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