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Tue, 06 Jul 2010 11:23:40 -0400

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Offshore Drilling: Reactions to the Recent BP Spill

Wed, 26 May 2010 07:00:00 -0400

On March 31^st, 2010, President Obama spoke at Andrew’s Air Force Base in Maryland about Energy Security and the future of U.S. dependence on foreign oil imports. The talk centered on offshore drilling and the administration’s new energy proposal to “open vast expanses of water along the Atlantic coast, the eastern Gulf of Mexico and the northern coast of Alaska to oil and natural gas drilling.”[1] Moreover, it would end a longstanding moratorium on oil exploration along the east coast from the northern tip of Delaware to the central coast of Florida. Nearly one month later, on April 20, 2010, the semi-submersible drilling rig Deepwater Horizon experienced and explosion and fire killing 11 people in the blast and releasing thousands of barrels of toxic oil into the Gulf of Mexico. As a result, earlier talks of expanding offshore drilling have all but collapsed and the new focus is on investigating what went wrong and who is responsible. The rig is owned by Transocean , operated by British Petroleum (BP) and Halliburton is BP’s subcontractor directly related to the incident. To avoid the blame game, BP takes full responsibility for the accident. In terms of what went wrong, key stake holders including the United States Coast Guard and the Department of the Interior’sMinerals Management Service (MMS) launched a joint investigation on May 11, 2010 to determine the cause of the incident. In the case of the BP spill on April 20^th, these risks became fully apparent to the public’s view[2]. Critics from various backgrounds continue to join the debate to discuss what went wrong and what action should be taken on offshore drilling moving forward. Specifically, on a more hands on front, the Environmental Protection Agency (EPA) launched a research initiative to track the environmental effects of the spill. To put it succinctly, the BP spill awakens a larger question of whether the U.S. should continue offshore drilling and if so, should there be tightened regulation. Through this analysis, readers will be presented with an investigation of the legislation governing offshore drilling, specifically with a look into the past and current oversight of risk management. Towards the end of the analysis, after arguments from both sides are explored, readers will be presented with the reasons why offshore drilling requires more regulation of the risks and failure prevention technologies.

Background:

For those unfamiliar with oil production by sea, oil spills occur due to collisions of tankers or barges, oil well blowouts, leakage of oil tanks or pipelines, or the damaging of used oil.[3] Since inception in the mid-1900’s, U.S. offshore production of oil and natural gas raised concerns involving economic impact, environmental effects, and safety. [4] In the wake of these concerns, legislators passed the Outer Continental Shelf Lands Act (OCSLA) in 1953. The OCSLA defined the boundaries of federal and state jurisdiction of drilling areas plus outlines the Department of the Interior’s responsibilities for managing and maintain offshore lands subject to environmental constraints and safety concerns. In other words, it is a key piece of legislation in defining the government’s role in offshore activities.

By the 1960’s, the drilling industry was booming and the U.S government enjoyed income from hungry oil companies looking to buy land for drilling. Safety however tended to be overlooked in these sales. To take a case in point, consider the Santa Barbara channel spill of 1969. Union Oil Company’s drilling platform A blew out and a massive mixture of crude oil and gas came roaring up the drill casing out of control.[5] The Santa Barbra spill devastated California residents and sparked series of regulatory policies.

Accordingly, the National Environmental Policy Act passed in 1969 which requires the Federal government to consider the environmental impacts of any proposed actions as well as reasonable alternatives to those actions[6]. The Clean Air Act of 1970 mandates that natural gas and oil facilities prepare, as part of their development plans and reporting procedures, detailed emissions data to prove compliance with U.S. clean air standards.[7] The Coastal Zone Management Act of 1972 gives states the power to object to any Federal action that they deem not consistent with their approved Coastal Zone Management Plan.[8] The Endangered Species Act of 1973 protects and promotes the conservation of all species listed as endangered by restricting Federal actions that are likely to harm harass, or pursue them.[9] The Clean Water Act of 1977 is the primary law governing the discharge of pollutants into all U.S. surface waters. On closer inspection of these policies, it clear that they address the environment risks but do little to address the regulation drilling of technologies. When Petroleum engineer Robert Sharp testified before the Santa Barbra City Environmental Quality Advisory Board, he emphasized that as drilling advances into deeper waters, blowout control becomes increasingly difficult.[10] Moreover, a U.S. Geological survey shows nearly two out of three offshore blowouts have occurred in deep wells.[11] What this means is that the technology was barley sustainable at increased depths. The Department of the Interior established the Minerals Management Service in 1982 to investigate these issues directly. Basically, the MMS is the federal agency that manages the nation’s natural gas, oil and other mineral resources on the outer continental shelf. Based on empirical data, the MMS estimated that, “over the 10 year period from 1986- 1995, approximately 800 accidents or spills occurred at roughly 4,000 MMS inspected platforms on the outer continental shelf.”[12] Essentially, offshore drilling failures continued amidst the issues raised by past incidents.

The two more recent pieces of legislation that impact offshore drilling are the Oil Pollution Act of 1990 and the Energy Policy Act of 2005. The Oil Pollution Act (OPA) of 1990 was passed in response to the 1989 Exxon Valdez tanker accident in Alaska that resulted in 11 million gallons of crude oil spilling into the Prince William Sound.

As stated by the EPA,

The OPA improved the nation’s ability to prevent and respond to oil spills by establishing provisions that expand the federal government’s ability, and provide the money and resources necessary, to respond to oil spills. The OPA also created the national Oil Spill Liability Trust Fund, which is available to provide up to one billion dollars per spill incident.[13]

This legislation is significant because it increased penalties for regulatory noncompliance, broadened the response and enforcement authorities of the Federal government, and preserved State authority to establish law governing oil spill prevention and response.

The Energy Policy Act of 2005 signed into law by President Bush requires the MMS to conduct a comprehensive inventory analysis of the estimated natural gas and oil resources on the OCS and several provisions in the Act provide increased incentives for natural gas and oil development in offshore areas in order to maintain or stimulate production. Consequently, this policy expanded the MMS’s role in governing the OCS but encourages companies to increase offshore developments. This legislation will have a key role is defining the recent growth of the offshore drilling industry.

In discussions of the recent BP spill, the questions of drilling depth and fail safe technologies are issues of debate. Investigations conducted by the MMS and U.S. Coast Guard reveal BP ignored red flags during rig operations. The Wall Street Journal reports that, “Testimony from two contractors says mud was withdrawn before a final cement plug, which would have been one more safeguard against natural gas surging from the well, poured.”[14] What is more important is that “ the Deepwater Horizon’s blowout preventer had a dead battery, was leaving hydraulic fluid and in any case was too weak to shut down the wells in certain circumstances”[15] This means that the technology was flawed even before the explosion. A supervisor for the MMS testified that “although the industry has standards for blowout preventers, he isn’t aware that anyone in the U.S. government checks to see if those standards are met.”[16] In making this comment, the MMS supervisor is hinting to the lack of oversight. Ben Casselman and Jennifer Levitz of the Wall Street Journal note, “One 2007 paper presented at a Society of Petroleum Engineers conference in Bahrain that was co-written by a BP engineer said new drill pipe “has in some cases exceeded the capacity of some [blowout preventer] shear rams to successfully or reliably shear drill pipe.”[17] In plain, the BP engineer is saying that the technologies are advancing at different rates and the lack of compatibility raises safety issues. In what some might view as the main blow to investigation is summed up by BP CEO Tony Hayward, in an interview after the rig sank when he described the blowout preventer as a “failsafe piece of equipment that clearly has failed”. [18]

As the investigation continues, the testimonies by government and industry officials raise key questions in approaching the issue and future solutions.

Alternatives/ Approaches:

Time Magazine contends, “a blown oil well in the Gulf of Mexico creates an environmental catastrophe—but the accident could at last provide the impetus to create an energy policy that is smart pragmatic and green”[19] One school of thought proposed by the think tank Resources for the Future (RFF) is that “It’s much too early to try to predict the impact of the massive oil spill in the Gulf of Mexico. But it’s not too soon to start thinking hard about it—and what the response ought to be.”[20] In looking for a solution, RFF Senior fellow and Vice President for research Mark A Cohen advocates, “we need a policy that includes a significant amount of monitoring and well-designed penalties for noncompliance.”[21]Furthermore, “To encourage compliance with laws prohibiting the discharge of oil, government agencies can hike the penalty for a violation or increase monitoring activities to raise the likelihood that an offender will be caught and punished.”[22] Basically, Cohen is calling for tougher regulations on oil companies to reduce the number of spills. On different front, Sierra Club Executive Director Michael Brune in a public statement said, “We need assurance that this won’t happen again. We need to restore the federal moratorium on drilling off America’s most fragile coasts, immediately. Then we need to launch an aggressive plan to wean us from dirty oil over the next two decades.”[23]In other words, Brune proposes that the federal government put in place policies that end offshore drilling.

Peter Van Doren and Jerry Taylor of the Cato Institute take a more holistic approach to the issue by stating “First, we don’t know for sure exactly how this happened or exactly who was at fault and why. Until we do, it’s impossible to say exactly what public regulators could do to reduce risk”[24] They go on to note that “The fact that few Americans are willing to shut down existing platforms suggests that, for the most part, we intuitively understand there are benefits to drilling that ought to enter into the conversation.”[25] In making this comment, Doren and Taylor admit that they cannot proposes solutions until all of the facts are gathered; however, the discussion should include the benefits of drilling with public support for drilling taken into consideration.

On the federal side of the issue, the DOI and EPA take different approaches to the solution. Secretary of the Interior Ken Salazar announced that “The tragedy aboard the Deepwater Horizon and the massive spill for which BP is responsible has made the importance and urgency of our reform agenda even clearer.”[26] To put it another way, his new reform will include policies directly related to the incident. As an illustration, Secretary Salazar proposes to restructure the Minerals Management Service, provide additional resources for federal spending, sponsor an independent investigation by the National Academy of Engineering, and expand authority to review exploration plans[27]. These plans are significant because they aim to provide regulations that were previously overlooked.

The EPA is expected to release their regulative agenda later this month but in the meantime, the agency has conducted Air tests, Water Tests and Sediment tests in affected areas.

Analysis:

At this point, the underlying facts are clear—past regulations of the offshore drilling mainly addressed environmental concerns, leaving out technological risks. As a result of the Santa Barbra incident in 1969, numerous legislations were passed to protect the national waters and animals. However, technology was not a major concern until the Exxon Valdez incident of 1990. President Bush attempted to re-awaken the issue in 2005 by passing a new Energy Policy but it can be argued that his approached only accelerated company developments. The BP spill last month has finally made the issue technology flaws visible.

Time Magazine is not too far off in their assumption that this indecent has the potential to redefine an energy policy that is smart. By smart, this does not mean banning offshore drilling all together as Dune from the Sierra Club proposes rather a new monitoring system similar the RFF senior fellow Cohen’s suggestions.

Some may question what are the economic tradeoffs? According to a 2005 report by the Energy Information Agency (EIA) the MMS collects about $6 billion dollars on average in revenue each year from the individuals and companies that lease offshore lands for natural gas and oil development.[28] Also, companies currently pay 8 cents a barrel tax on oil that goes into a clean-up reserve fund. What these numbers mean is that the MMS has an invested interest in continuing offshore drilling. In terms of the tax revenue, news sources say this tax may quadruple based on the recent incident. On paper these incentives appear to be great but on closer inspection the spills have harsh effect of the local economies, including fishing industries and revenues from tourists visiting the beaches. In a 2001 study, John R. Shultz and Paul Fishbeck of RFF found that “the 4,000 platforms in the Gulf of Mexico account for 14% of all oil and 25% of all natural gas consumed in the United States and therefore are very important sources of energy.”[29]The economic tradeoffs should be further explored once the data comes in from the companies and effected neighborhoods.

The testimonies by BP and government officials give insight into how future legislation should be shaped. The fact that BP officials sanctioned less safety to cut cost should be a poignant indicator to any legislator. The MMS evidently needs to have a heightened role in regulating drill technologies at unexplored depths while BP and other Oil Rig operators needs to redefine which technologies classify as “failsafe”. These conditions should be met before President Obama even considers expanding drilling as he proposed in March 2010.

Conclusion:

Ultimately, Lamar McKay, Chairman & President, BP America summed it up paramount during his oral testimony in front of the U.S. Senate Energy and Natural Resources Committee. “There are two key sets of questions here, and we are actively exploring both of them. First, what caused the explosion and fire on board Transocean’s Deepwater Horizon? Second, why did Transocean’s blowout preventer – the key fail-safe mechanism – fail to operate?”[30]These questions will take time to answer due to ongoing investigations and the government should take a strong look at every factor involved before enacting a new policy. As stated here, smarter technology regulation involving MMS and corporate partners should be the focus of future policy and economic tradeoff associated with risk.

[1] John M. Broder, “Obama to Open Offshore Areas to Oil Drilling for First Time” The New York Times - Breaking News, World News & Multimedia, 30 Mar. 2010, Web. 12 May 2010.

[2] Please See Attached Status Map

[3] Paul I. Liu, “Oil Spills.” Energy, Technology, and the Environment, (New York, NY: ASME, 2005, Print) 149-50

[4] United States Department of Energy, Energy Information Administration, By Erin Mastrangelo, (Sept 2005), Web. May 2010.

[5] Jeffrey Potter, “Problem Platform.” Disaster by Oil: Oil Spills: Why They Happen, What They Do, How We Can End Them,( New York: Macmillan, 1973, Print) 154-55

[6] Michael E Kraft and Scott R. Furlong, “Environmental and Energy Policy.” Public Policy: Politics, Analysis, and Alternatives, Washington, D.C.: CQ, (2010, Print) 354-55

[7] U.S. Environmental Protection Agency, Web, May 2010.

[8] U.S. Environmental Protection Agency, Web, May 2010

[9] NOAA :: National Marine Fisheries Service, Web, May 2010. .

[10] Wesley Marx, “One-Eyed Technology.” Oilspill, (San Francisco: Sierra Club, 1971, Print) 58-59

[11] Marx, 58-59

[12] Paul S Fischbeck, and R. Scott. Farrow, “Work Place Accident and Compliance Monitoring: The Cae of Offshore Platform Inspection,” Improving Regulation: Cases in Environment, Health, and Safety, Washington, DC: Resources for the Future, (2001, Print) 335-36

[13] U.S. Environmental Protection Agency, Web, May 2010

[14] Russell Gold and Neil King Jr. “Rig Ignored Red Flags,” The Wall Street Journal (New York 13 May 2010, Print) 1-A6

[15] Ben Casselman and Jennifer Levitz. “Congress Homes In on Rig’s Blowout Preventer,” The Wall Street Journal (New York 13 May 2010, Print) A6

[16] Casselman, A6

[17] Casselman, A6

[18] Casselman, A6

[19] Bryan Walsh, “The Far-Ranging Costs of the Mess in the Gulf - TIME.” Time, (6 May 2010)

[20] Resources for the Future, From the Gulf of Mexico, Questions About Oil. J.W. Anderson, (05 May 2010, Web)

[21] Mark A. Cohen,”Oil Spills: The Deterrent Effects of Monitoring, Enforcement, and Public Information.” RFF Weekly Policy Commentary. Resources for the Future, (20 Apr, 2010, Web May 2010) .

[22] Cohen

[23] Michael Brune, “Oil Catastrophe Worsens, President Heads to Gulf Sierra Club Calls for Drilling Moratorium, Aggressive Clean Energy Plan,” Sierra Club: Member Center, Sierra Club, ( 02 May 2010. Web, May 2010) .

[24] Peter Van Doren and Jerry Taylor, “Gulf Oil Spill: Same Old Arguments | Peter Van Doren and Jerry Taylor | Cato Institute: Commentary.” The Cato Institute, (14 May 2010, Web, May 2010) .

[25] Van Doren

[26] http://www.doi.gov/news/pressreleases/Salazar-Launches-Safety-and-Environmental-Protection-Reforms-to-Toughen-Oversight-of-Offshore-Oil-and-Gas-Operations.cfm

[27] U.S. Department of the Interior. Salazar Launches Safety and Environmental Protection Reforms to Toughen Oversight of Offshore Oil and Gas Operations. Press Release, Secretary of the Interior Ken Salazar, (11 May 2010, Web) .

[28] United States Department of Energy, Energy Information Administration, By Erin Mastrangelo, (Sept 2005), Web. May 2010.

[29] Fischbeck, 335-336

[30] U.S. Senate Energy and Natural Resources Committee Oral Testimony, 111th Cong. (2010) (testimony of Lamar McKay, Chairman & President, BP America), Print

The Microsoft Store

Mon, 27 Jul 2009 12:04:05 -0400

Props to Gizmodo for releasing a full presentation of Microsoft’s early retail store design. The presentation is by Lippicott, a design and brand strategy consultant firm that was hired by Microsoft to help develop the store’s concept, principle, and design. Microsoft has confirmed the designs are genuine but adds that this is an early plan and nothing is final. Take a look at Gizmodo’s 54 pages of the presentation here . In my view, this is a great marketing move by Microsoft. Not only does this repair their weakened brand from Vista, it directly competes with the trendy Apple Store. The store will feature Windows 7, Xbox, PCTV (Windows Media Center) Surface and Windows Mobile products with dedicated staff members on deck. This is my favorite: Pay to have your birthday party at the Microsoft Store. Call of Duty + Xbox 360 + Thearter screen size display = a great birthday party for a teenage gammer!

Apple is disrupting the Wireless market with Iphone: 2009 Patents reveal next-gen iphone features

Tue, 14 Jul 2009 16:49:21 -0400

Patent: Integrated touch screen

Applications:

Haptic Feedback(vibrations upon touch)

Virtual Click wheel and other buttons

Patent: Fingerprint ID

Applications:

Non-visual use while driving, greater security?

Patent: RFID Use

Applications:

Instant content from placing your phone near other items with RFID.

Place your phone near a movie poster with RFID, instantly stream trailer on your phone.

Patent: Front Facing Camera

Application:

ichat, facial recognition, and more!

All I can truthfully say is Apple is on the move, CATCH UP GUYS!

Links to Full Patents Here:

United States Patent Application 20090167704

United States Patent Application 20090100384

Microsoft finally gets it right with Office 2010!

Mon, 13 Jul 2009 12:46:51 -0400

Check Out the MS Office 2010 Release videos here!

http://www.istartedsomething.com/20090713/office-2010-revealed-in-detail-via-microsoft-videos/

Let the smartphone wars begin!

Mon, 13 Jul 2009 06:20:29 -0400

Blackberry: What yall know about that BBM? Black....Berry....Messenger....nuff said!

Iphone: Common on now, we all know its about the number of the apps. I'm 50,000 strong!

Palm Pre: Nice one iphone, but try running at least two apps at once. I'm running 5+ with ease!

Google Android: Hey anybody need some steroids? I get stronger with every launch. I'm currently on these G2 pills!

Blackberry: Sorry dude, I only eat the finest FRUITS and BERRIES.

Iphone: Berries..smh. Strictly APPLE SAUCE for me!

Palm Pre: yeaa i think I 'll just kick rocks on that one.....

"A man of character finds a special attractiveness in difficulty, since it is only by coming to grips..."

Fri, 10 Jul 2009 09:00:00 -0400

“A man of character finds a special attractiveness in difficulty, since it is only by coming to grips with difficulty that he can realize his potentials”

- Charles De Gaulle

Could you do without Technology for a week?

Thu, 09 Jul 2009 09:00:00 -0400

Could you do without Technology for a week?

Google Chrome OS: Should Microsoft be afraid?

Wed, 08 Jul 2009 10:24:00 -0400

Recently, Google announced that a Chrome Operating System is the works to be released sometime next year. According to Google, ” Speed, simplicity and security are the key aspects of Google Chrome OS. We’re designing the OS to be fast and lightweight, to start up and get you onto the web in a few seconds.” In other words, users can expect to see an initial launch of the OS for the Netbook market. I’m loving this news since it will create some healthy competition with Microsoft’s Windows OS. Yes, Microsoft should be very afraid.

Check out the Google Blog for the Official Press Release

http://googleblog.blogspot.com/2009/07/introducing-google-chrome-os.html

With 400,000 units sold to date is the Palm Pre really over...

Wed, 01 Jul 2009 15:43:29 -0400

With 400,000 units sold to date is the Palm Pre really over hyped? Silicon Alley Insider thinks so.

Welcome

Wed, 01 Jul 2009 11:32:00 -0400

Do you remember the feeling of opening new gifts when you were a kid. You demolished the wrapping paper and destroyed the box, to finally leave a fresh new toy standing tall.

Here at Fresh Tech Out the Box, our goal is to recreate this childhood feeling everyday by bringing you, the readers, up to date information on new technology that can add value to your lives. As a disclosure, all we ask is for you to go easy on the wrapping paper( Us) as we bring you great content.

For those of you having a hard time remembering your childhood excitment, here’s a refresher video of two kids receiving Fresh Tech!